Could car PCP affect remortgage application?

gowie45

My wife and I want to remortgage our £250k house to borrow another £10k for home improvements in March / April

Could our chances of being accepted be affected in any way by trading in my car to move to a new four year car PCP deal now?

I currently have two years of a car loan remaining costing £340 a month.

The proposed new PCP would see my car repayments REDUCE by £30 a month - but increase my overall debt level and increase the lending period to four years.

My credit score is excellent.

Could anyone in the know explain if the change of car finance might impact our remortgage chances at all?

FungalCow

Are you planning on drawing the money in March/April. If so then you can do your remortgage applicaiton now, secure your mortgage offer (protect you from rate rises as well as give you the confirmation that the money will be offered) and then draw the funds down when you are ready. A lot of lenders offer 6 months remortgage offers.

If you are not going to do the application until March then in theory it should be enough time for everything to settle down and the old loan to come off the report and new one be all set up. With your outgoings decreasing it should put you in better position and lenders should view that favourably. Saying that, lenders underwriting is tweaked all the time so unless you stick an application through then you wont get a complete answer.

ACG

Just be careful applying now, some lenders only issue offers for 3 months.

In terms of the PCP, the £30 a month lower payment will help affordability. The overall debt level may not be an issue, but some lenders do have debt to income calculations, if your overall debt is between 30-50% or more of your annual income, some lenders would outright decline you.

The other issue is you will probably need a credit check carrying out, although as Fungalcow says, a credit check now is probably not going to cause too much damage if you make an application in March time.

gowie45

Thanks, very useful.

Suppose the question which confuses me is this.

When I apply would Nationwide care about my *monthly* outgoings to income ratio (42%) or my *overall* debt ratio to annual income (currenly 30%, but higher if I take on a new car loan).?

ACG

I do not think Nationwide have a debt to income calculation behind the scenes, but I do not use them a lot so I could be wrong.