Possible negative impact on mortgage affordability

Robson1978

My brother in law works for a motor manufacturer and can get family very good deals on one year leases. The deal would be great for me but am concerned because the cost would be deducted straight from brother in laws salary and I would set up standing order. However brother in law only 30 yrs old and looking to move house reasonably soon. Any thoughts on whether this deal could have a negative impact on how much he will be able to borrow when he moves house?

Thanks
Robson

Thrugelmir

The monthly commitment will be taken into account when assessing affordabilty.

Wait until he has moved house perhaps.

Robson1978

Hi - that's my fear. What about if we drafted an agreement confirming my monthly payment to him??

Thanks
Robson

Thrugelmir

Unforunately there's no way that the lender can ensure that you maintain the repayments. The contractual liability sits with your BIL.

Robson1978

Thanks for your thoughts. Unless we can get the employer to agree to take the money from mysefl (very unlikely as they dont know me) I think we'll need to postpone our plans!

Cheers
Robson

kingstreet

Typically a lender will treat this like a credit commitment and deduct the annual cost from gross income before multiplying it out.

Therefore, a £200 per month commitment will "cost" £9,600 in reduced borrowing power, if the lender uses 4x income.

The applicants' other credit and any dependents will also impact that maximum, so he really needs to work out if he will have any maximum borrowing issues before committing to something for you.

Robson1978

Thanks - one final question before I give the idea up as not going to happen! Any agreement would be for a maximum of 12 months (as the lease deals that they offer to family are never any longer than this).

Would that help at all in his affordability calculation? I assume not as in reality we would possibly just change cars every 12 months but keep on taking a 12 months lease for as long as he stays working for the company in question.

Regards
Robson

kingstreet

Typically, lenders take into account anything with more than six months left to run.

Robson1978

Ok thanks. And you dont think they would take into account if they could clearly see the money being transfered from myself to brother in law each month via DD or SO? I would be more than happy to draft a legally binding document and therefore would they possibly consider classing this as additional income??

Regards
Robson

kingstreet

Nope. No way they can enforce a third party agreement.

They will assume he has to pay it and you will pay nothing.