FTB Mortgage & existing car payment

b_enji

Hello everyone, I've been trawling through the forums to find an answer to this and wonder if someone can offer some advice.

Firstly here is my situation: I am a first time buyer buying a property with an 80% mortgage, deposit is partially being funded by parental gift (and is being dealt with by my solicitor accordingly).

My current commitments are sub £1k balance on a credit card (interest free in purchases usually stick everything on the card so I get the points then pay off in full before interest is charged). I also have £180 going to VW each month to a hire purchase on a car.

This has been running since sept '11 and will end march 2015 (ie 14 payments made with 27 remaining).

As I was looking for a city centre property I had said that I would sell the car and thus pay off the finance on it before moving only i have secured a property that has parking so ideally I want to keep the car.

I am saving circa £200 a month from my income, current rent payments are £375 and my mortgage will be £377 so I know I can afford to keep the car - my mortgage is a 3 year fix so payments won't change whist I have this agreement.

However Woolwich have sent their offer and one of the conditions is that the c/card and car loan (which they have incorrectly quoted as £9.5k, current settlement is £8k) are settled 'within 30 days of completion'.

My question is what checks are they likely to do / what evidence might they require to confirm this has been done? Ideally I want to leave the car payment running as it was a good deal at the time (no deposit and £180 for a brand new car) which will be hard to beat to find replacement and if I find it hard / that I am not using it enough to justify the car i can then sell and settle the finance after say 6 months.

My suspicion is that they don't check but if the mortgage payments then fall behind that they then investigate and argue that the agreement hasn't been honoured. Don't think this will happen as I am ensuring I keep at least 4 months salary saved should I lose my job.

I had wondered whether to pay VW the remaining payments (27x £180=£4,860) and then had the car back at the end of the term and pay myself the £180 each month so I don't lose out. I don't know whether this would be good frm the lender's point of view as the affordability will be improved but there is still the balloon payment a the end of c£4.5k which I guess they will still (rightly) consider as debt. Also I would rather pay for this from monthly income rather than savings.

I am just wondering if there is a way round it given that the condition says the finance should be settled within 30 days, rather than on or before completion.

Any advice anyone can offer would be appreciated!

kingstreet

Ask Woolwich/Barclays to re-underwrite the application based on you keeping the credit commitment post-completion. Provided you aren't borrowing close to the maximum, this should be okay.

Assuming 4x income is the maximum, £180 per month would reduce your borrowing power by £8,640.

b_enji

I am not borrowing the maximum (4.25x salary right now it due to my credit rating they said it could be up to 5x)

With the payment running they would lend more like 3.5x, this is based on serviceability more than anything- i know I can afford the payments and the mortgage however as they are however they re looking at it with rates at 5.5 rather than 3.5.

I've already said to them I can afford them as its what I already pay and the car will be paid off once the fixed rate on the mortgages comes to an end and (potentially) the repayments increase.

So I don't think they will be able to reunderwrite this for me.

kingstreet

b_enji wrote: »

i know I can afford the payments and the mortgage however as they are however they re looking at it with rates at 5.5 rather than 3.5

Please clarify what you mean by this.

The rates depend on loan to value. The amount they will lend will depend on affordability and income.

I can't think of a lender which charges a higher rate where affordability is questionable.

Are you saying the LTV will increase if you pay off the loan and that will put you into a higher rate bracket? If so, yes, that would be the case.

b_enji

No that's not what I mean...

The LTV will not change. The rate I am going to be paying will be 3.69% (2 yr fix) or 3.99% (3 yr fix). I will probably take the 3 yr option.

On this basis, my repayments will be circa £377 - my current rent is £375. Therefore, I know I can afford to keep the car payment running.

However as you will know lenders 'stress test' to ensure people will still be able to repay should rates go up, from my conversations with the Woolwich the rate they use in their affordability calculation is 5.5%-6%.

As this equals higher payments (higher than they will be for the next three years) in their eyes I can't afford the £180 car payment.

My point is the rate will be fixed for the next 3 years during which time the car will be paid off, so their concerns around affordability on this basis do not wash but having spoken with them they will only disregard a payment if it is going to be settled within 6 months.

So in summary I know I can afford it but in Woolwich's stress calculations they don't think I can.

b_enji

Have seen an article where someone has had this experience and their Woolwich advisor has said they never check whether this has been done unless they then go for further borrowing or start to default. Apparently an IFA and their solicitor agreed with this.

What are everyone's thoughts?

I am thinking of getting my solicitor to find out from woolwich what evidence will be required and then take it from there.