Using a personal loan for a home deposit
Thursday 30 May 19
What do you do if you have plenty of income to cover the loan payments for purchasing your first home, but you don’t have the deposit? Would it make sense to get a personal loan, and use cash from that for the deposit?
Let’s begin with the basics. If you have plenty of income, and it has been coming in for a while, you should have a deposit. Should you think that you are saving a lot, but there is nothing significant in your bank accounts, then it’s time to look for a leak in the boat. It’s going somewhere!
This also makes sense from the perspective of personal comfort. Naturally you want that home for a number of good reasons. The bottom line is that you will feel better to have your own home. However, if you are under constant stress in trying to make mortgage repayments, then the cart has gotten before the horse! A good way to ensure that you are not going to be under stress like that is to save first.
What you do – and we can help you with this – is that you work out how much the loan repayments are likely to be when you do make the purchase. Add on a bit extra to allow for interest rates to go up. Convert that to a cost per pay period.
Then add on an amount to cover rates, maintenance and any new costs that are going to come with that home. Work out the annual cost, then divide it by 26 if you are paid fortnightly.
Finally, subtract what you are paying in rent per pay period.
The final total is what you should be saving per pay period.
If this is a bit complicated for you, give us a call or drop us an email, and we will help you to work it out.
As you save this way, you will then know what it ‘feels’ like financially to be purchasing that home. It will also help you to save for the deposit that you need. And, it will also help convince the bank to give you the money!
There are some other things that might give you that up-front boost, so also look at these articles: