Servicibility Impact of Using Personal Loan as Deposit?

I know a lot (or most?) lenders don't allow using a personal loan as a deposit but of the ones left that might, how much of an impact does using a personal loan from a bank have on servicibility? Would have genuine savings but rather borrow the cash for tax deductions and then put my own savings into the offset for a buffer.

Eg, borrow $50k and use that as a deposit with Bank B.

And how easy would it be to get the mortgage and then consolidate the personal loan into the mortgage?

 

It's easy to refi the PL into the loan once the house grows - the problem is this doesn't always happen quickly. You may pay off the PL before the house grows enough to refinance it.

 

what happens if u have a 50k cc and just before u go to get finance u pay off the cc / cancel it. and then apply for finance. will your credit rating look heaps bad? (you always paid the cc of each month) and u are not using it for a deposit.

 

Unless you only just applied for it, it won't affect the file at all. If you've had it for ages, no issue.

 

i see and by canceling it before you apply for finance would increase your borrowing capacity back to normal?

 

Yep!

 

For those without serviceability issues, it could be OK. Having a $1000 p/m repayment though will reduce borrowing capacity by close to $150k. Pretty steep impact for a 50k personal loan.

In terms of accessing financing - if going for a higher LVR loan it may be difficult to justify if there aren't assets elsewhere too (i.e. having no money, applying for a 95% loan with a 50k personal loan as a deposit).

Re credit cards, thats fine. As a generality, lenders generally want to know your position after the house completes when assessing your application, not before. In terms of credit history impact, its largely the amount of times your applying for credit and who its with (and how large) as a guide to the credit worthiness of the borrower. Plenty have large credit limits to suit their lifestyles and have this adjusted around their lending needs.

 

Serviceability issues aside, practically, its difficult getting a personal loan for that sort of amount without having a specific purpose. Most personal loan providers preclude 'deposit on a home' purpose. Home loan lenders that accept a borrowed deposit still don't like it, and the assessor and LMI provider are going to look for other ways to decline the application.
What does work for quite a few lenders is where you hold on to the borrowed funds for 3 months. I've had a couple of these approved over the years.