Lease scheme paid up front, affect mortgage?

bwlv1

Hi All,

Partner has the opportunity to lease a vehicle through a works scheme, we have a mortgage application which is awaiting offer, we would like to order a car but we are wary due to the mortgage application going through and will not do anything to jeopardize that.

My question is, if we paid off the full 12 or 18 months lease payments up front (if this is an option) would this mean the impact on the mortgage application is none? As there will be no monthly commitment to affect affordability, and the finance is recorded against the asset as it is recoverable, opposed to a loan?

All advice appreciated!

betmunch

If you pay the first 12 or 18 month up front then after this time you will still have the monthly commitment.

bwlv1

Sorry I should have given more detail, it is an 18 month only scheme, at the end you hand the car back or pay a purchase price.

betmunch

I see. If there will be no monthly payments at any point then I wouldnt expect it to be included in any affordability calculations.

bwlv1

Although after looking further into the T&C's, this phrase leads me to believe that some sort of outstanding loan may show on a credit check;

'you are provided with a loan over 18 months to purchase the vehicle. At the end of the Agreement there is the option to sell the vehicle back to ******* or to keep it by paying the final installment.'

Now as the car would be owned by my partner the loan may show in her name, would this still affect things as there are no monthly payments towards the loan.

betmunch

Ahhh its a loan not a lease, that would probably show as the contractual payment even if you had made all the payments in advance because of the final payment at the end would be outstanding

bwlv1

betmunch wrote: »

Ahhh its a loan not a lease, that would probably show as the contractual payment even if you had made all the payments in advance because of the final payment at the end would be outstanding

Thanks for your advice with this, in which case they would use the, for example, £300 per month payment and adjust affordability accordingly, so £3600 x income multiple and reduce the maximum they would lend by that amount? If this is the case we would still be borrowing under the maximum, would they have any other grounds to decline purely in terms of this?

Does the final figure e.g. 30k come into play at all or just the monthly outgoing?

betmunch

bwlv1 wrote: »

Thanks for your advice with this, in which case they would use the, for example, £300 per month payment and adjust affordability accordingly, so £3600 x income multiple and reduce the maximum they would lend by that amount? If this is the case we would still be borrowing under the maximum, would they have any other grounds to decline purely in terms of this?

Does the final figure e.g. 30k come into play at all or just the monthly outgoing?

Thats not how affordability works I'm afraid. They work out how much your mortgage would cost at a nominal rate and this figure needs to be under a set percentage of your net income.

With an additional loan they would either subtract this figure from your net income before calculating if you could afford the mortgage, or increase the calculated mortgage payment by the same amount, then see if they consider that affordable

bwlv1

Is it an acceptable practice to ask the lender what I have asked on here? If I give them all the information and allow them to see if we still meet the affordability criteria (which we still do according to their calculator) would they ever supply something in writing that they wouldn't retract on the offer if we went ahead with the car scheme?

Could even enquiring give them cold feet and cause a withdrawal of the offer?

betmunch

No problems with asking the lender how they would treat it.


No chance of getting a lender to write they wont retract the offer if you changed your circumstances.


If they think you have gone ahead and the payments are going to make the mortgage unaffordable in their eyes they will withdraw the offer.


Cant you just decide if you want to join the scheme after you have drawn down the mortgage? If you decide before then you need to tell them about a change of circumstances which will mean a reassessment of the application.

bwlv1

Thanks betmunch, I think waiting until we have completed is the most likely and sensible option for us. But with one car coming to its imminent end of life the scheme would solve the problem, just don't want it to cause more important ones.