Car Finance Effects on Mortgage Borrowing

FATBALLZ

I'm planning to apply for a mortgage around Feb/March time, I'm hoping to get an AIP for about £150k, I have £30k saved up as a deposit.

I am now changing jobs though and need a car for my new job. The commute is fairly long so driving is the only option and it needs to be a half decent car that doesn't fall to bits after a few long journeys.

I know that if you take out a loan for say £10k, and go to the bank with £30k and say 'I have £30k deposit', they will minus the outstanding £10k off and say 'actually you only have £20k'. Does the same principle apply to car finance? With car finance you could for example be on a 12 month or 2 year deal where you hand the car back at the end or have the option of buying it, so how do you put a value on the debt?

GMS

Your monthly payment for the car will be taken as a credit commitment and factored into affordability.

I know what you mean as in if it was only a 2 year loan why woul dthe lender take it into account for the whole term but the fact is if you fell behing because of the car loan the lender would have serious trouble going for repossession as they could not stand up in court and say they ignored a loan for a car as it was only for (for instance) another 18 months. 18 months of missed mortgage payments would spell repossession and the lender would be on a sticky wicket if they were deemed to have lent in an irresponsible manner.

If you had 30k deposit they would take it as 30k, not 30k less the loan. The loan will be factored into the affordability calculation.

guinness79

do you get any paymrnt from your employer for a car?

I receive a car allowance and am expected to drive a 3 year old or less car ... therefore have a loan over 3 years...

Our mortgage is with standard life.... they just asked to see copy of my employment contract stating value of car allowance and that it covered my loan payments for the car

Senior_Paper_Monitor

It is the 'changing jobs' that is most likely to impact negatively on you - many lenders require 6 months (this varies) minimum in the current employment and 'not in probation period' (this is almost universal).

GMS has explained clearly the impact this will have on your 'affordability' (i.e how much you can borrow).

Be careful !

wodgerdodger

Try the A&L their rules used to be one of continuous employment over the last 6 months and didnt worry about probation. Their policy however may have changed since takeover by santander. The question of probation is somewhat questionable as I believe an employer can legitimately sack you within the first 12 months or 2 years ( i cant remember which) without any reason under current employment law.
No doubt someone can correct me if it has been superseded or updated.

Car loan commitments are normally deducted like any other loan i.e annual cost but at same time if in receipt of car Allowance most if not all of it would be factored in as "income".

jennfercain

I just bought an 06 focus diesel for 6 K, why not just save up and get something along those lines. I've never taken car finance, just saved for what I need not want, all my friends are jealous as they hate being weighed down by their car repayments.

FATBALLZ

jennfercain wrote: »

I just bought an 06 focus diesel for 6 K, why not just save up and get something along those lines. I've never taken car finance, just saved for what I need not want, all my friends are jealous as they hate being weighed down by their car repayments.

I went to look at a 55 mazda 6 yesterday for £5300, my original budget was £3000 but given the amount of commuting I need something reliable, comfortable and safe if a lorry hits me or if it snows for example.. I've got the money for it (as I mentioned I have £30k saved), however if I just spend the cash I thought I may not get the best mortgage deal as I'd have less deposit, so I wasn't sure how it would work with car finance.

To be honest though I'm starting to think I'll just pay cash and save up to £30k again, as other people have mentioned a lot of banks want 6 months at current employer anyway, it did occur to me that might be an issue when I started looking for other jobs, but I just couldn't bear to stay where I am for another 6 months

dimbo61

Just had a look on the YBS website ( as an example) and they have deals for 90%LTV, 85% LTV, 75% LTV and 60% LTV
Now on a £150 property you would need £15K deposit to get the 90%LTV but better deals the more you can put down
So 85% LTV would require £22,500 deposit plus fees!
That still gives you £6/7K plus your old car to upgrade your motor ( sorry no BMW M3!)

blueberrypie

FATBALLZ wrote: »

I went to look at a 55 mazda 6 yesterday for £5300, my original budget was £3000 but given the amount of commuting I need something reliable, comfortable and safe if a lorry hits me or if it snows for example.. I've got the money for it (as I mentioned I have £30k saved), however if I just spend the cash I thought I may not get the best mortgage deal as I'd have less deposit, so I wasn't sure how it would work with car finance.

It really depends on your position. You'd need to look at how much you're hoping to borrow on the mortgage and what your income multiplier would be. You also need to look at how much deposit you'll have and what your LTV will therefore be. If reducing your deposit will shift you into a higher LTV range - e.g. if it took you just over the 75% or 90% mark, you'd lose the option of certain mortgage deals, and so it might be better to keep the deposit intact and borrow the money - but if not, it's probably better to use some of the savings for the car, especially if you're hoping to get a mortgage for a high income multiple.

FATBALLZ

blueberrypie wrote: »

It really depends on your position. You'd need to look at how much you're hoping to borrow on the mortgage and what your income multiplier would be. You also need to look at how much deposit you'll have and what your LTV will therefore be. If reducing your deposit will shift you into a higher LTV range - e.g. if it took you just over the 75% or 90% mark, you'd lose the option of certain mortgage deals, and so it might be better to keep the deposit intact and borrow the money - but if not, it's probably better to use some of the savings for the car, especially if you're hoping to get a mortgage for a high income multiple.

We have a joint income of 70k, and I was looking at getting an 80% deal, which is what spending the money may disqualify me for.