Using a personal loan for down payment to keep my cash reserves free?

Question

Hello! Thoughts on getting a personal loan for a down payment for owner finance?

I have the cash for it but would rather keep the cash free and pay off the loans together; I can afford it

Maribel Manibo · Answer

You can see what you get from business credit lines which you could liquify (more of a business versus personal finance strategy) - can be up to 100-150K. If you're a startup, can be 0% introductory. I'm planning to do something similar. Happy to chat more about this, feel free to DM me!

Caleb Brown · Answer

I would not. If you need to save more so you have left over cash do that. Leveraging the purchase and down payment is way too risky and a lot can go wrong.

Zach Wain · Answer

@Abigail Joanna - technically, Conventional loans do not allow you to get a last minute personal loan and use it for downpayment.  There are ways around this, like getting the personal loan well in advance so it is seasoned money.  But, a high interest rate on a personal loan does not make much sense.

There are a variety of downpayment assistance options that might be a better fit.  Conventional loans require 3% min downpayment and FHA is 3.5%.  If you have that much, I would stick with a normal downpayment.

Patrick Roberts · Answer

This will depend on whomever is offering the financing. Professional lenders are not going to be happy about this, while a one-off owner financier may not care. Reducing the lender's exposure based on LTV is only half of the purpose of a downpayment; the other half is to make the borrower put skin in the game to tie them emotionally and financially to performing on the loan. I can also tell you that a personal loan for DP will make it more difficult for the note-holder to sell the loan at a later time if it's discovered by the note buyer.

Denise Supplee · Answer

@Abigail Joanna, You're essentially stacking two loans. A personal loan usually will have a higher interest rate as well. So, your housing payment will increase. If something happens, you will have that higher payment, regardless. However, using your savings will leave your housing payment the same. And if you need something later, you can always get a personal loan later. I hope that makes sense.

Mike Grudzien · Answer

I don't think an owner in a seller finance deal cares where the down payment comes from (unlike conforming mortgages).  But I'm going to watch for the replies here.