Mortgage Application And Loan Application

hobbgoblin

Hello All

Basically I am currently in the process of a mortgage application, Passed Credit Check etc but waiting for AIP. Now I also have a PCP car loan which has affected my affordablity somewhat especially as the monthly repayment is more than the mortage.

I have owned the car two years and want rid for a cheaper car. I owe 17500 to buy it off the finance company so I am looking at taking out a loan for the 17500 to buy the car out. Then put it up for sale with a view to repay 7500 back from the proceeds of the sale. Keeping 10k for a cheaper car and a lower monthly repayment.

So my question is this, am I endangering my mortgage application even though I am reducing my monthly expenditure? Even the full £17500 is £60 a month cheaper than I am currently paying on the PCP.

The car is in negative equity for trade in so must be a private sale, also I am not far enough through to voluntarily terminate.

Any help is greatly appreciated, I do all my banking with one bank.so I'm hoping they would see the loan reduces expenditure.

Thanks

Teaandtoast0124

Applying for a loan whilst currently applying for a mortgage is a big no no... Stay away from hard credit searches.

hobbgoblin

What about once the mortgage is agreed in principle?
The reduced lending will reduce my monthly expenditure by almost 200 a month coming from PCP.

kingstreet

Standard advice is no new applications for credit from AIP through to completion.

Anything can affect your credit score with the lender, regardless of the impact on affordability. A credit search could be enough.

Assuming you have applied directly to the bank with which you have put all your eggs in one basket, you really need to ask them how your actions might impact your mortgage application, rather than rely on the speculation only possible on here...

TravelBugHappy

Have you even thought this through - with PCP you'll have a balloon payment at the end, as your not paying off a large portion of the loan - thus your minimum payment is much lower - what is the monthly payment? You may find its similar (or at least not too much smaller) to a standard loan for £7500.

As far as I'm aware lenders will look at the monthly payment & not the total amount outstanding (maybe a broker can clarify this?)

How is your affordability looking as things stand at the moment? because until you've found a buyer for the car, paid off the finance and repaid some of the bank loan (which could realistically take a few months) it would look to the bank as though you had the PCP and bank loan - which definitely would be a problem.

Have the bank questioned the amount of the PCP?

hobbgoblin

I would be paying all the PCP off straight away so it would not look like I have both. The loan for the full figure including balloon is still 40 less per month than the existing PCP.

I passed affordability etc but the chance to reduce my outgoing by 150 per month is obviously going to be helpful upon moving to a new home.

TravelBugHappy

I've just done a quick calculation for you and a loan of £17500 @ 3.6% (which MSE is showing as an excellent rate at the moment) over 3 years equates to payments of £513 per month - is your PCP really more then that?

Are you planning on moving soon? - do you have a buyer for the car?

As others have said the loan application alone could affect your credit rating - then add in the other variables and it may seriously affect your mortgage app - particularly if you want to buy in the next 3 months.

And if the bank has no problem with the PCP payments currently then it may be worthwhile waiting until your mortgage is finalised

hobbgoblin

The new property is new build to be completed in Oct. Over 4 years the loan would be and that does work out less than my current PCP.

The Halifax passed the credit check,nationwide declined me. I have now spoken to Halifax and they advised to let it go to AIP then apply, if it fails before the funds are issued because of the credit score I have grounds for appeal due to having bettered my financial situation despite taking on the loan.

lee111s

Far too big of a risk.

With a newbuild you'll more than likely be expected to exchange quite some time before completion. If your mortgage offer is withdrawn during that time you're in a very stick situation as you're legally commited to complete and buy the purchase but may have no funds to do so.

TravelBugHappy

... agree with last poster - it seems silly to risk your mortgage when there's so much that could go wrong. especially since you will only save £150 per month and that's once your car has sold - which itself could take some time - you even say your car is in negative equity so you may struggle to get the right price for it - especially if you want a quick sale
Did nationwide decline you on affordability?

hobbgoblin

I believe the Nationwide failed me on affordability yes. I'm not entirely sure why, as my disposable income is 668 every 4 weeks,paid 13 times per year.that's after the mortage,existing PCP everything which I thought was a fair amount. obviously I was wrong in this assumption