Can You Use a Personal Loan for a House Deposit?
Buying a home is one of the biggest decisions you’ll ever make.
Where you live and the type of house you own is something that will affect you each and every day.
Of course, it’s also a big decision in terms of the price tag involved. Most of us will go through our entire lives without every buying anything that costs anywhere near as much as a house.
If you’re currently thinking about becoming a homeowner, the finances are most likely weighing on your mind, especially that all-important down payment. Many people have the income to handle the ensuing monthly payments, but it’s that initial step that proves insurmountable.
This is why you may be wondering if you can use a personal loan for a house deposit.
Is It Possible to Use a Personal Loan for a House Deposit?
The good news is that you can definitely use a personal loan for a house deposit.
Depending on how far you currently are into house-hunting, you may already know firsthand that mortgage lenders scrutinize borrowers from a number of different angles before agreeing to give them a loan.
However, they’re not overly concerned with how you come up with that initial deposit. Again, it says more about your current savings than your ongoing ability to make monthly mortgage payments.
It’s also not remotely rare for young, first-time homeowners to borrow money from their parents for that deposit. Often, it’s a wedding gift.
Again, the bank generally doesn’t care where that money comes from provided it covers their deposit threshold and it’s clear you have a steady income to pay back the mortgage.
Should You Use a Personal Loan for a House Deposit?
With that being said, just because you can do something doesn’t always mean that you should.
Taking out a mortgage is obviously a substantial financial obligation, so it might not be a great idea to add to that with another loan right away.
A mortgage will already impact your credit score, at least temporarily. So, adding a personal loan for a house deposit is going to sink it further – again, albeit only temporarily.
You can also expect that the lender is probably going to insist on some higher rates as that mortgage may look like a risk to them.
Using a Personal Loan for Part of Your House Deposit
If money is tight – and it usually is when you’re buying a house – another option is to simply use a personal loan for part of your house deposit.
This can give you some very welcomed breathing room during a time when it will feel like you’re spending money left and right (e.g. movers, new furniture, etc.).
As the loan is much smaller, it won’t hurt your credit score as much and the lender will most likely feel much more comfortable providing you with favorable terms.
3 Ways to Help Pay for that House Deposit
As such, let’s quickly cover some simple options for funding that house deposit so you won’t need quite as big a personal loan for it.
1. Sell Everything You Don’t Need
One of the best parts about moving into a new home is that it forces you to take a pretty brutal inventory of your belongings. You’ll quickly find just how much you own that you never really use.
Don’t wait until you’re moving into a new home to do this. Instead, take stock of your property right now. Be completely honest about what you’ll never use again and then either throw a garage sale or use a site like Craigslist to turn a quick profit.
2. Put All of Your Windfalls into the Down Payment Fund
Your budget generally doesn’t include the money you “make” from things like bonuses, raises, or tax returns.
Therefore, for an entire year, stick to the money you allow yourself in your budget and put all those funds toward a down payment fund. That, alone, will go a long way toward making this amount more manageable.
3. Set Up an Automatic Transfer
Talk to your bank about using their automatic transfer service so that a certain percentage of every paycheck you receive goes toward your down payment fund. This will make it much more painless to meet your eventual goal
Getting the Best Possible Personal Loan for Your House Deposit
If you don’t have time to institute the three tips above or you know you’ll still need a personal loan to cover the entire amount, getting the best personal loan is important.
We recommend a couple great options for you below.
The first would be to get a Peer-to-peer loan online. Just visit the top lender for peer-to-peer personal loans at LendingClub.com – Low Rates on Personal Loans from $1,000- $40,000
Another option would be to use a lending network like PersonalLoans.com – Personal Loans Up To 35,000. You fill out one easy form and get access to their network of lenders.