Best place for personal loan?

CuppaCocoa

Myself and my partner are hoping to put a bid on a house that's come up for sale. If we're successful, we will be short by about 70k. We don't want to go down the mortgage route and would prefer to take out a personal loan. We're both with Bank of Ireland (individually) and you can borrow up to 65k with them over 5 years. The re-payment is 1,377 per month @ 10.3% variable.

Are there better options available? Should we be thinking of two separate loans instead of one? Would this give us a better chance? We'd hate to be turned down! Both of us are in full-time permanent employment.

Dr. Dodger

Sorry why don't you want to go down the mortgage route?

You could get the €70k over a 5 year term with a lower interest rate no?

I know there will be some extra costs but would probably still work out cheaper no?

eagle_i

Sorry but your post does not make financial sense. Why would you pay at an interest rate of 10.3%????

When you can easily take out a mortgage for 5 years at a rate between 3.3% and 4.3% variable. If you wanted a fixed rate for the full 5 years your fixed rate is between 4.3% and 5.10%. The rates quoted above are the APR rates which is the only way of accurately comparing like for like. I'm not sure whether you are quoting the APR rate for the personal loan above, if it's not the APR is more realistically closer to 12% than 10.3%!

Taking the higher rate of 5.10% for your 5 year fixed your monthly repayments are going to be €1,249, and if you are a first time buyer the mortgage interest relief reduces that to €1,180 or if you are not a first time buyer with the relief your repayment is €1,212. Now why would you pay the bank €1,377 with no entitlement to interest relief on a personal loan.

Even if you factor in the cost of purchasing a mortgage protection to cover the loan your additional cost will be no more than €100/€200 a year, obviously depending on your age.

CuppaCocoa

We were hoping the enticement of 'cash buyer' would give us the edge over those with mortgage approval?

eagle_i

If you can get approval for a personal loan of €65k, there is no reason why you can't get approval for a mortgage. You are still effectively a cash buyer.

CuppaCocoa

eagle_i wrote: »

Sorry but your post does not make financial sense. Why would you pay at an interest rate of 10.3%????

When you can easily take out a mortgage for 5 years at a rate between 3.3% and 4.3% variable. If you wanted a fixed rate for the full 5 years your fixed rate is between 4.3% and 5.10%. The rates quoted above are the APR rates which is the only way of accurately comparing like for like. I'm not sure whether you are quoting the APR rate for the personal loan above, if it's not the APR is more realistically closer to 12% than 10.3%!

Taking the higher rate of 5.10% for your 5 year fixed your monthly repayments are going to be €1,249, and if you are a first time buyer the mortgage interest relief reduces that to €1,180 or if you are not a first time buyer with the relief your repayment is €1,212. Now why would you pay the bank €1,377 with no entitlement to interest relief on a personal loan.

Even if you factor in the cost of purchasing a mortgage protection to cover the loan your additional cost will be no more than €100/€200 a year, obviously depending on your age.

Thanks for the above. Didn't realise the rates were that much cheaper! Probably a better chance of getting one than a personal loan for that amount!

eagle_i

lilybarlean wrote: »

Thanks for the above. Didn't realise the rates were that much cheaper! Probably a better chance of getting one than a personal loan for that amount!

Lilly, when making your mortgage application ask them for the max mortgage they will approve. That way if you are in a bidding war for the house (unusual given the present property market) you know what your budget is and can quickly make decisions whether to bid higher. Going back to a lender looking for a bigger mortgage is very messy.

CuppaCocoa

eagle_i wrote: »

Lilly, when making your mortgage application ask them for the max mortgage they will approve. That way if you are in a bidding war for the house (unusual given the present property market) you know what your budget is and can quickly make decisions whether to bid higher. Going back to a lender looking for a bigger mortgage is very messy.

Thanks, but 70k is the maximum we're prepared to ask for. That brings our bid to 400k. We definitely cannot go over that as it will be 420k with stamp duty

eagle_i

Just because you ask for the max loan does not mean you need to take it up. Simply when applying for the €70k ask them 'out of interest' what the max mortgage approval could you get. It is just to keep your options open. Just one thing when you receive approval, make sure it is not 'Approval in Principle', it is better for you to have an approval letter before bidding. We've all found out the banks have only one principle in mind and its not you or me or joe public but themselves! Approval in principle is a promise that we will consider you for a mortgage of x amount, but when the reality comes to getting the full approval and drawdown, it can back fire on you. As they only promised to consider you for the loan!

CuppaCocoa

eagle_i wrote: »

Just because you ask for the max loan does not mean you need to take it up. Simply when applying for the €70k ask them 'out of interest' what the max mortgage approval could you get. It is just to keep your options open. Just one thing when you receive approval, make sure it is not 'Approval in Principle', it is better for you to have an approval letter before bidding. We've all found out the banks have only one principle in mind and its not you or me or joe public but themselves! Approval in principle is a promise that we will consider you for a mortgage of x amount, but when the reality comes to getting the full approval and drawdown, it can back fire on you. As they only promised to consider you for the loan!

Thanks eagle i, will bear that in mind!

chris85

wow ok OP definitely you will need to get a mortgage. Get approved for whatever amount in principle. If the house is €400k and you are only looking for €70k most banks will not have a problem with this as long as you are earning. The security of the house being worth much higher than the loan will make it easier but ability to repay is always most important.

Also the interest rate on a loan would be shocking at that amount. Mortgage all the way.