Personal loan before applying for a mortgage

Adam12321

Hey Guys,

In the next few weeks my HP agreement is over with my current car and I could really use a new one. I'm thinking of applying for a £10k personal load to buy a new car as the interest rates are better then HP. But, in the next 9 or 10 months I will be applying for.my first mortgage and wonder if having this loan will be a negative to go against me when applying.

I don't have a lot of debt, I have a CC which is using a very small amount of the available credit, and I have my contract phone and current car HP. once the HP is over, I won't have a.lot on my credit file. Maybe the loan would be a good thing?

Thanks for the advice.

[Deleted User]

It will impact your affordability.

If you can avoid taking one out, do so. Use your card to maintain a credit history.

Edi81

Need or want a new car?
How much do you want to buy a house?
Try running the numbers through a lender affordability calculator both with no loan and loan and assess if it!!!8217;s worth it.

foxy-stoat

How much deposit do you have saved up?

Maybe buy a cheaper car for a couple of thousand and wait for a year after you get your mortgage to get a nicer one.

dld2s

My daughter is going through the same thing ATM, buying her first house, she was going to buy a new car also, financial advisor recommended that she stuck with her car for now as it would make it harder for her getting the Mortgage she wanted

[Deleted User]

Depends on how much you need the car - mileage, job, age of existing car etc.

My job is well over 20,000 business miles a year (was 40k a year until recently). Although I've been told by mates etc just "get an old banger for £1k" - I was very worried about it breaking down on the motorway etc, or even a standard "flat battery" making me miss a days work is £100+ down the drain, along with reputational issues of not being on time/missing appointments etc.

If your new(ish) car breaks down, then it's one of those things... if you've got a 52 plate from car that breaks down (when driving is an essential part of your job) then IMO it was avoidable.

I've got a car that's over £200 a month (absolute fortune because my credit history is trashed). If I'm able to re-finance onto a personal loan before my mortgage I will, to lower the repayments, but I doubt I'll be able to.

I've got the cash to settle it (about 9k) - but then my deposit is reduced by 9k.... Looking at affordability etc, in my circumstances in terms of getting the house I want I'm better off keeping the loan, getting the house then paying the loan off after (probably by 2nd charge 6m after completion if I still can't get unsecured loan even as a homeowner).

But again - it does depend on salary, how close to affordability limits you are, deposit etc.

For me - due to past history - lenders will much prefer a 20k deposit and a car loan @ £200 p/m that's been maintanced than a 10k deposit but no other debt. £10k isn't much of a cover for them if I needed to be repossessed after 6 months - £20k should be sufficient! To be blunt, they couldn't give a damn (beyond the affordability checks) if I don't pay my car loan, they want the extra £10k in their pocket!

You could also consider loading it onto a 0% credit card (either directly or indirectly) - but for me £10k outstanding on credit card saves me interest, but reduces mortgage affordability by an extra 40k compared to the loan.

If you can avoid buying the car, and it's reasonable to keep your existing one (no problems with it etc) I'd obviously do that, but only you know how much you need the car and can weigh it all up

Also worth considering that although you aren't directly allowed to use a personal loan for a mortgage, that far in advance the "spare" funds from the loan could supplement your deposit....

£10k and £15k are likely to be the same rate (assuming affordability) - at say 3% it's about £90 a more month in repayments, but that £5k could tip you from one LTV band into another - meaning significant interest savings (say you dropped from 91% LTV to 89% LTV). With interest rates potentially at 5%, you could take that 5k, profit from it for the next 9 months, then use it for the mortgage as part of your overall savings - but if you deposit is only say 6k they'll scrutinise it a lot more. If your deposit was 25k, that £5k wouldn't cause an issue IMO.

foxy-stoat

Just because a car is £1000 means its going to break down as soon as it its a "M" road.

I drove 35,000 miles in a car I bought for £1800 without issue apart from a dead battery and the normal brakes/tyres and servicing.