Would you recommend using a credit card for a house deposit?
I’d like to get a property for investment ( let it for a while) but I do not have the 15% deposit thats needed. I’ve paid all my credit cards and now have substancial amount on them that could cover the deposit for a property.
I hope to put the credit card balance back into the morgage after some months when the morgage has gone through. Later depending on how much value the property will have gained sell up and start again or continue to let it out for a while.
Do you think its a wise move and if not, (apart from saving) what other way would be better? Your imput would be really appriciated.
NB; I am in UK and the plan is to make mimnimum repayments on the card for the first 6 months, then consolidate the credit card balance with the morgage. Please read the question properly before answering. Thanks
I could get 100% if I was to live in the house but for letting, I’l need a deposit so that I can lease the house to the local authority for guarantee rental per month.
May 30th, 2010 at 1:19 am
errr no expensive way toborrow money alert alert!
May 30th, 2010 at 1:32 am
As this is a property for investment, it would make a lot more sense to wait until you can actually afford the deposit – there are all sorts of associated costs with leasing that you would have to pay, and to use your credit card to borrow money is a very expensive way to do it – the interest would be massive.
May 30th, 2010 at 1:44 am
I don’t think lenders will allow it either.
Check out first time homebuyer programs, you may be able to qualify for one with less than 5% down. Maybe your tax refund could be your seed money?
May 30th, 2010 at 2:24 am
EXPENSIVE TO SAY THE LEAST..AND NOT SMART TO SAY THE WORST.
May 30th, 2010 at 2:27 am
THAT is the dumbest thing ANYONE could do.
Buying a house with a credit card is sill, the interest alone is crazy.
Why not buy a small fixer upper and flip it, I do and its a good way to be your own boss and make money, although Im no millionaire!
May 30th, 2010 at 3:19 am
Sorry girl you need NOT to do any investing in any property. you don’t understand Risks.
you want to borrow at 15-30% interest to make a deposit. Can you say property values Do go down?
visit daveramsey.com to learn what you haven’t and bankers prqy you never ever learn or worse apply in life.
Credit slave cards and bankers allways win , you lose.
May 30th, 2010 at 3:28 am
I would not recommend this route. If the lender won’t allow more than 85% borrowing now then you will not be able to consolidate the credit card debt in 6 months time because the property value would need to have gone up by 18%.
You could consider further borrowing on your existing mortgage on your home to provide the deposit, otherwise you really are stuck with saving.
There is a lender called GMAC who will lend up to 89% for a Buy-to-Let so you wouldn’t need such a big deposit, but they don’t accept direct customers – you must go through a mortgage broker.
May 30th, 2010 at 4:04 am
While I would not recommend using a credit card for the deposit, if you do some leg work it could work.
Your idea of getting a 100% mortgage by living in the property is good, you can get a lodger, and the rent can go toward the mortgage (there are tax efficiencies doing that too)
or… you can look for property below market value.
That is, in the real estate agents window, the houses on a particular street are selling for 100K. (best to check on comparables – other actual sales in the area – on the land registry site) and one is for sale for 85k (perhaps offered by a motivated seller – moving overseas, property belonged to mother who just passed away etc) Buy to let mortgages are often based on yield more than the actual purchase price of the property. So if the 85k house is renting for the same ammount as the 100k house, you may be able to get a loan for the full ammount, or at least, get the mortgage using your cards then remortgage for the market value of the property the next month.
Paragon offer some good buy to let mortgages.
I would recomend looking at http://www.ready2invest.co.uk while the deals are all overseas property, and you would need some cash to put into those deals, the education section they have is really good.
Good luck
May 30th, 2010 at 4:10 am
Soon as you put the deposit on the credit card it will probably throw off your debt to income ratio and you will not get the loan.
Good luck
May 30th, 2010 at 4:11 am
No, this is an unwise move. If you want to borrow, get a loan, the cheapest you can arrange. Credit card repayments are one of the most expensive ways to borrow money. What few people realise is the time involved and the sheer slog of going round looking at properties. When you’ve decided on one, the process of buying it takes a few months, and involves expenses. Then you have to spend some money on it before you let it – and then you’ll either have to pay a letting agent, or advertise it yourself, drawing up a Shorthold Tenancy Agreement that complies with the law. Unless it’s freehold, there will be service charges. Then you wait for a tenant – often properties are “void” empty for weeks (one of mine for 4 months once) and all that time you still have to pay off the mortgage. And in your case, the credit card loan, too.
Look, please give me credit for treating your proposal seriously. I did not take the p*ss, I have addressed your question properly. Buying property and selling it on (oh don’t forget Capital Gains Tax at 40% by the way, unless the property is your home) sounds easy, I know. It’s not, it’s hard work and you need to know what you’re doing. With respect, I don’t think you do.