Question about buying with cash (on loan) prior to mortgage drawdown

Hi folks,
We are hoping to buy a certain house and my parents have offered us a loan to add to our considerable savings to buy the house outright prior to us drawing down our mortgage. There is lots of interest in the house this would probably seal the deal so to speak.
We have approval for a small mortgage and part of this is for renovations to the house which the bank knows.
The plan would be:
We pay the vendor in cash as soon as possible and drawdown the mortgage as soon as is possible. Pay my parents back and then use the rest for renovations.

As its our first time buying we just wanted to make sure there is no problems doing it this way?
Sorry if it's a really stupid question!

I don't really see where the benefit of this is... will you get a discount from the vendor for paying cash? Or is the motive to have more money for renovation?. At the end of the day, you will still end up owing the same amt. of money / mortgage? Why not keep your mortgage to a minimum, take the money from your parents and pay them back over time eg through an agreed monthly payment? That way you are still borrowing the same amt. overall but paying interest on a smaller mortgage by getting an interest free loans from your partents - thus making a saving?

The benefit is they will be sure to get the house ahead of any purchasers who may be dependent on mortgage approval or selling existing house.

I also imagine the parents want the money back and are not interested in giving it as an interest free loan.

I understand the reason you want to do this but think you should check with your solicitor whether or not there is any disadvantage to it.

Thanks for the replies.
Yeah wbbs, we are doing it to get the house ahead of other purchasers otherwise we probably wouldn't get it.

We still need a mortgage, it just gets us the house faster.
My parents would get the money back as soon as we draw it down from the bank which in fairness shouldn't take too long. I wouldn't like to ask them for a long-term loan as it's part of their nest egg.

The mortgage that we are asking for is the smallest possible amount that we could buy house and do minor renovations with.


I'll have a chat with the solicitor and see what he says. Hopefully it'll work out that way! Thanks for the advice!

Definitely talk to your bank about this plan before you go ahead. I had considered doing something similar but the bank (NIB) said there was no way they would give a mortgage after the house had been purchased.

WaterSprite said:

Definitely talk to your bank about this plan before you go ahead. I had considered doing something similar but the bank (NIB) said there was no way they would give a mortgage after the house had been purchased.

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That is exactly what I thought of.

You are buying a house for cash, and then asking the bank for an equity release mortgage. Banks are so jumpy these days that this may go against their current lending policy. This may not make sense, but lots of things dont make sense at the moment in the mortgage market.

Find out what your bank thinks of the plan.

Also, if the bank will allow an equity release mortgage immediately after purchase, will they insist that the sale is registered with the land registry before they do this, If this step is delayed, just because of backlogs and
paperwork, they might not go ahead with the loan, or delay it seriously.

elb said:

There is lots of interest in the house

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Says who, the estate agent...?

Don't let them pressure you into paying more than the property is/will be worth. It already sounds like they are rushing you.

And what will you do if you get mortgage approval now and later the bank won't give you a mortgage for whatever reason. It's not unheard of for banks to have given mortgage approval and day of drawdown to withdraw it. Your desire for the house is clouding your judgment and your willingness to borrow from your parents could all end in tears for all of you. Is it worth the risk?