PCP Affect On Mortgage Application

TheSmiler

Hello,

Myself (23) and my fianc!e (21) are looking purchase our first house in the next 6-18 months.

We'll be looking at a property costing around £130,000, and currently have £13,000 saved up (so we're looking at a LTV of 90%, but depending on how things pan out it might lower to 85%).

My current car is half way through its finance agreement and has around £3,000 outstanding. The car itself would be worth a good £5,500 if sold (I got it valued as a part-ex recently at £6,200). It's caused me a few issues lately which has led me to think about getting a replacement.

I'm considering settling the finance and putting the remaining into a PCP financing deal on a new car. I do a lot of miles (~18k/year) and having a three year warranty, three years servicing etc. would suit me well - I'm not concerned about "owning" the car - I just want something nice, comfortable and that I can rely on.

The PCP plan would work out at £249/mo over 41 months, with an optional final payment of £6,817 to own the car. My current finance costs £199/mo over 3 years, although that's not PCP and at the end of it I'd own the car.

My salary is £30k pa, and my fianc!e has two part times jobs which currently bring in around £5k pa, although she'll be looking to up her hours once she's finished her college course.

Between us, the only finance we have is on my car. I have a credit card but it's only used to collect Clubcard points and is paid off every month in full. I don't know what lenders take into consideration, but I have to fork out around £200 per month in fuel for my commute... as well as £40 per month to park there. So, travel is my biggest and only "fixed" expense.

The PCP agreement itself I believe would but £15.8k of debt on my credit report, as that's the balance that's ultimately being financed... I think that's how it works with PCP? I last checked my score a couple of months ago with Experian and it was deemed "Good" (900 and something).

So, the real question is... would switching to this PCP package affect our chances of getting the mortgage we want?

Any help and advice would be very much appreciated

kingstreet

The cost will be deducted from your income. It won't affect your chances, it will simply affect how much you can borrow. £249pm means about £3k per annum.

A lender using a 4x income multiple will reduce your maximum borrowing by £12k.

As you're already paying £200 pm, it's only the difference that matters. £50pm = £2,400 off your maximum mortgage.

TheSmiler

kingstreet wrote: »

The cost will be deducted from your income. It won't affect your chances, it will simply affect how much you can borrow. £249pm means about £3k per annum.

A lender using a 4x income multiple will reduce your maximum borrowing by £12k.

As you're already paying £200 pm, it's only the difference that matters. £50pm = £2,400 off your maximum mortgage.

Thanks, that's how I think I was hoping it would work... I have a couple of additional questions:

• Is taking out PCP finance of that amount likely to affect my credit score badly? And therefore affect my chances of being accepted for a mortgage?
• Do some mortgage lenders ask about other expenses such as fuel and parking? They turn out to be fairly significant for me...

TheSmiler

Sorry to bump the topic, but does anyone have any insight on the above?

kingstreet

No idea.

No.

Lenders make assumptions on general expenses.

TheSmiler

Thanks kingstreet, that's very helpful

My remaining question then is with regards to the affect PCP finance would have on my current credit score...

Is there anyone who can share any light on that?