Advise please! Voluntary termination of care hire and mortgage

xLucyx · 29 August 2018 at 10:37AM

Hi,

Not sure if I am posting in the correct place as new to this.

My car finance is up next August however I can voluntarily terminate the car hire now if I wish to.
My partner and I are looking to buy a new car to share.
As my car is in negative equity the car finance company have advised that I voluntarily terminate the car hire deal in order to get a much better deal with the new car.
I have never missed a payment nor do I owe any money by walking away from the contract.
My only concern is that my partner and I are looking to get a mortgage next year.
Will this affect the mortgage??

AdrianC · 29 August 2018 at 11:32AM

xLucyx wrote: »

My car finance is up next August however I can voluntarily terminate the car hire now if I wish to.

As my car is in negative equity the car finance company have advised that I voluntarily terminate the car hire deal in order to get a much better deal with the new car.

This makes no sense. I presume you're on a PCP. Next August, you can simply hand the car back. End of, no more money either way needed - unless you've exceeded the contracted mileage, or the car is in poor condition. Equity is a non-issue.

If you VT now, then "equity" is a non-issue. You have a legal right to end the contract, again subject to condition (and mileage may or may not be viewed as part of that - there's a debate that's not reached court, AIUI).

However, you can terminate the contract early by rolling it into a new finance deal, and -ve equity would then be an issue. And by rolling that into the new finance, you would be paying interest on it over the life of the new contract...

My only concern is that my partner and I are looking to get a mortgage next year.
Will this affect the mortgage??

Any new credit agreement could affect a mortgage decision, if you're a bit borderline on whether you'll be accepted for a particular amount/LtV.

comeandgo · 29 August 2018 at 11:47AM

I assume your car is being paid Hire Purchase. One of my friends regularly handed her car back just as soon as it became no cost to her to hand back and get another on HP. She has had mortgages for many years so I can only assume it made no difference on her credit files.