Can I Get a Loan for a House Deposit

Getting a loan to fund a house deposit in the UK is technically possible, but it is not straightforward. Most mortgage lenders prefer that your deposit comes from your own savings or a gift from a family member. Using a personal loan or credit borrowing to finance a deposit is generally discouraged and may lead to a mortgage application being rejected, depending on the lender’s policies.

The reason lenders are cautious is that borrowing for a deposit increases your overall debt, making the mortgage riskier in their eyes. If your mortgage provider finds out that your deposit is from a loan, they may decline the application, adjust the terms or ask for additional financial checks to ensure affordability.

Can You Use a Personal Loan as a Deposit?

In theory, you can take out a personal loan to cover part or all of your house deposit. However, you must declare this to your mortgage lender. If you fail to disclose that your deposit is borrowed, your mortgage offer could be withdrawn. Lenders assess your overall debt when deciding whether to approve a mortgage, so any new loan will affect your debt-to-income ratio and potentially your credit score.

Some high-risk or specialist lenders may accept this arrangement, but they often charge higher interest rates or require a larger mortgage deposit overall. For most mainstream lenders, a borrowed deposit raises concerns about long-term affordability and repayment capacity.

What Are the Risks?

Borrowing money for a deposit means you are taking on two debts at the same time. This could stretch your finances and make it more difficult to manage your monthly outgoings. Lenders are increasingly focused on affordability and financial resilience, especially in light of recent interest rate rises and cost-of-living pressures.

If your finances are tight from the start, you may struggle with repayments, especially if your circumstances change. This could put your mortgage and your home at risk. There is also the danger that borrowing for a deposit leads to further borrowing to furnish or renovate, compounding the debt burden at the very beginning of your homeownership journey.

Are There Any Alternatives?

A more acceptable alternative is receiving a gifted deposit from a parent, grandparent or close family member. This is widely recognised by mortgage lenders, as long as the money is given freely without expectation of repayment. Lenders usually require a signed declaration from the person gifting the deposit confirming it is not a loan and that they have no legal interest in the property.

Another option is shared ownership, which allows you to buy a portion of a property with a smaller deposit and pay rent on the rest. Government schemes such as First Homes or deposit unlock programmes for new builds can also reduce the deposit requirement and open up homeownership without needing to borrow additional funds.

Saving gradually, increasing your income or buying with a partner or family member may also help you build a deposit without turning to loans. If you're struggling to save, speaking to a financial advisor or mortgage broker can help identify affordable routes into the property market.

Can You Use a Credit Card for a Deposit?

Using a credit card for a deposit is even less advisable. Not only do most lenders reject this, but sellers and solicitors are unlikely to accept credit card payments for deposits due to financial crime regulations and source of funds rules. It can also signal financial stress to your mortgage provider, making approval harder.

Conclusion

While it is legally possible to get a loan to cover a house deposit in the UK, it is generally not recommended and often frowned upon by mortgage lenders. If you are considering this route, you must disclose it fully to your lender and be prepared for closer scrutiny of your financial situation. Exploring alternatives such as gifted deposits or affordable homeownership schemes can often provide a more secure and acceptable path to getting on the property ladder.