A bit of help please..

[Puntsdog]

Hi all,

My brother is looking to buy his house from the local Housing Association. He qualifies for a significant discount, so much so that the purchase price after a large deposit will be in the region of £20k.
His question is whether there might be any legal or other barrier/complication to simply taking a loan for the amount rather than a mortgage. He is comfortable enough financially for a loan of this amount to not stretch him so it does sopeem unnecessary to take out a longer term loan/mortgage.
I haven't bought a house in a very long time and have no idea. I did suggest he speak to an IFA although he does have an inherent mistrust of these people.
Can anybody see any reason why he cannot take out a bank loan for the amount required and proceed with the purchase in cash terms so to speak?

Thanks

[number2]

As far as I know how it's funded is imeterial so long as a paper trail proves its not laundered money.

[Dave+63]

There’s absolutely no reason that he can’t take out a loan and buy the house outright.

He can buy it any way that suits him best, whether that be a loan, mortgage or even credit card!

[Puntsdog]

Thanks for the replies. What happens 're a survey if he buys outright with no mortgage? Is that only required by the Lender?

[Dave+63]

He doesn’t actually need to have a survey if he doesn’t want to. Or any of the other billion and one searches demanded by the banks these days!

I wouldn’t advise that he didn’t have a survey etc but he’s in a position to make his own decisions regarding what expenses he chooses to incur.

[Tifa]

Why the loan?
You can get far far better rates with a mortgage.
He can arrange the mortgage term over whatever timescale he wants.
Does not have to be over 25 years etc.
The mechanics of actually paying the money to the vendor will be the same.
i.e. Mortgage lender or loan company pays money into his solicitors client account, once solicitor is happy everything'd in order, he'll transfer the oney over to the vendor.

[Puntsdog]

So he could get a 5 year mortgage? Is that possible?

[MB2]

Provided it is deemed affordable he can specify the mortgage term. He may want a 5 or 10 year mortgage- certainly the shorter the less interest he will end up paying back. He might want to spend some money on the house when he buys it so I would suggest he considers a lower monthly payment than he can afford as he can always over pay so maybe a 10 year mortgage vs 5 and potentially clear in 7 depending what he spends on the house.


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[Puntsdog]

Thanks everyone. He's a simple-life kind of chap so all of the above will help him along

[Lukea]

Best bet is to speak to a financial/ mortgage advisor.

[Tifa]

Always take the longest term on offer (within reason)
Then make overpayments to bring it back to your chosen term.
That way, if money gets tight, or if there's an emergency, you can always revert to the minimum payment.
Simple no/low cost saftey net.

[Dave+63]

Always take the longest term on offer (within reason)
Then make overpayments to bring it back to your chosen term.
That way, if money gets tight, or if there's an emergency, you can always revert to the minimum payment.
Simple no/low cost saftey net.

Good advice here with the only caveat being that, on the low rate deals, he will only be allowed to overpay by a certain amount each year without hefty charges.

The trick here is to overpay by the maximum allowed and put the rest of his intended overpayment in a savings account. Once the fixed deal is over, he can pay the saved amount of his mortgage before starting another fixed rate deal.

As he’s only borrowing £20k, it’s probably cheaper just getting a couple of interest free credit card loans.

[Pelicans]

Good advice here with the only caveat being that, on the low rate deals, he will only be allowed to overpay by a certain amount each year without hefty charges.

The trick here is to overpay by the maximum allowed and put the rest of his intended overpayment in a savings account. Once the fixed deal is over, he can pay the saved amount of his mortgage before starting another fixed rate deal.

As he’s only borrowing £20k, it’s probably cheaper just getting a couple of interest free credit card loans.

If he's buying through a housing association he is probably unlikely to qualify for a significant credit limit on an interest free credit card.

Mortgage is the way to go as it is secured lending (i.e. the property is collateral vs. the loan principal). As others have said, given the bank will have first lien on the property the interest rate will be preferable to a bog standard unsecured bank loan.