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Servicibility Impact of Using Personal Loan as Deposit?

Discussion in 'Property Finance' started by House, 27th Sep, 2016.

  1. House

    House Well-Known Member Premium Member

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    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?
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    50 k loan would be 700 to 1000 a month

    So for someone with heaps of income

    No issue

    For average income ..... Major issues

    Credit score may suffer a bunch due to poor balance sheet aside from gen savings which can be got around

    Ta
    Rolf
     
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  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    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.
     
  4. Elives

    Elives Well-Known Member

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    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.
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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

    Elives Well-Known Member

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

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Yep!
     
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  8. Redom

    Redom Mortgage Broker Business Member

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    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.
     
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  9. tobe

    tobe Well-Known Member

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    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.
     
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  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Cancelling card(s) on file for marginal score borrowers needing lmi may work against them with system scorers like NAB.

    say you applied for 2 cards in the last 12 mths , and under your bankers/brokers advice you can them to "improve score" or more usually serviceability.

    When you then apply, suddenly those 2 recentish enquiries on your file arent matched by a declared liability ...........................system may assume "what else arent you telling me "

    ta
    rolf