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Loan affordability, can I afford it?

edited 30 November -1 at 1:00AM in Loans
37 replies 4.3K views
Jimmy9012Jimmy9012 Forumite
38 posts
edited 30 November -1 at 1:00AM in Loans
Hi folks,

So, we will be moving in to our very own home next month (first time buyers). So, all cash we had has gone to the deposit.

My partner has health issues and she is starting to struggle with that each day. Due to this, and as the journey to her work is a little longer, she could really do with a comfortable car. The small car is not comfortable at all, very bumpy and not going to help her condition. Its not something we would get any finance support for through any motability type scheme, so would have to be self financed.

As all the cash has gone to the deposit, and as she needs it now (when we move in a few weeks so it does not exacerbate her condition), I feel stuck as to what to do. We would want to upgrade to a car that is larger for future family (no children yet), that will last us a long time, and that is comfortable. Even decent used look to be about 22k. And, as I have no funds left to buy now, that looks like the only option is to do a large loan... do I have any other options? Maybe lease (but doesnt that cost more)?

These are our finances once we move:
Monthly Income Details[/b]
Monthly income after tax................ 3616
Partners monthly income after tax....... 718
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 4334


Monthly Expense Details

Mortgage................................ 1070
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 35
Council tax............................. 150
Electricity............................. 41
Gas..................................... 32
Oil..................................... 0
Water rates............................. 37
Telephone (land line)................... 0
Mobile phone............................ 0
TV Licence.............................. 12.5
Satellite/Cable TV...................... 82
Internet Services....................... 9.99
Groceries etc. ......................... 240
Clothing................................ 50
Petrol/diesel........................... 160
Road tax................................ 0
Car Insurance........................... 30
Car maintenance (including MOT)......... 12.5
Car parking............................. 0
Other travel............................ 408
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 25
Buildings insurance..................... 11.5
Contents insurance...................... 11.5
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 100
Haircuts................................ 50
Entertainment........................... 40
Holiday................................. 0
Emergency fund.......................... 50
Total monthly expenses.................. 2657.99



Assets

Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0



Secured & HP Debts

Description....................Debt......Monthly...APR
Mortgage...................... 253500...(1070).....4.99
Total secured & HP debts...... 253500....-.........-


Unsecured Debts
Description....................Debt......Monthly...APR
Virgin Card....................3100......35........0
Total unsecured debts..........3100......35........-



Monthly Budget Summary

Total monthly income.................... 4,334
Expenses (including HP & secured debts). 2,657.99
Available for debt repayments........... 1,676.01
Monthly UNsecured debt repayments....... 35
Amount left after debt repayments....... 1,641.01


So, I think we could afford it, I am just not sure it feels sensible. We could get a far older car, but then due to age we get less use of it for the similar investment...

I think 22k would be about 400 PCM for 5 years...

What do you think we should do?
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Replies

  • edited 24 June 2019 at 4:00PM
    Willing2LearnWilling2Learn Forumite
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    edited 24 June 2019 at 4:00PM
    When considering affordability, your SOA must be accurate. Do you really have £1,641.01 disposable monthly income left over? Or is your SOA aspirational?

    If you really do have that amount of cash available every month, then I would respectfully recommend you save up for the car, as you will have the lumpsum in no time and will be able to save money on the interest you will pay. You could have the money saved up for the car in just over 13 months... :)

    Edit: Just to add, that if you do have £1,641.01 surplus every month, then how come you have no cash assets? There should be something saved up...
    I work within the voluntary sector, supporting vulnerable people to rebuild their lives.

    I love my job

    :smiley:
  • stripeyfoxstripeyfox Forumite
    474 posts
    you don't need to spend anywhere near that amount to get a decent car.
  • D_M_ED_M_E Forumite
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    Do you really need to pay £82 monthly for sat/cable - can you go freesat or freeview instead?

    Car - how much spare at 0% left on the card - could this be used to get a cheap car while you save for something better - once got a Granada for £500 which lasted 5 years.

    Also you need to save something for an emergency fund - what would you have to pay with if something, even minor, goes wrong?
  • BakingCBakingC Forumite
    107 posts
    100 Posts Second Anniversary
    How much deposit did you put down? Is your SOA based on new mortgage? Was rent previously higher as 4.99% seems high for a mortgage rate if your take home as a couple is over 4K so doesn't seem like you had a large deposit relative to your take home.

    Would it be worth considering your partner taking some work closer to home? If their income is only circa £800 a month then they have a car £400 + Petrol, tax, insurance they are only contributing a few hundred a month to the household. Obviously personal choice but just think spending £22k on a car might not be worth it if working closer could help with their health and they could earn just as much / save lots on travelling.

    But echoing other comments every month you delay buying the car you are 1.6K closer to it as you may struggle finding such a large loan even if affordability is fine straight after getting a mortgage so by the time you find a reasonable interest rate you may have 6-7K spent which should buy a reasonably comfortable used car to last for a few years while you save up for a nicer more comfortable one.
  • foxy-stoatfoxy-stoat Forumite
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    What car have you got at the moment that you need to replace it for a £22,000 car?

    As you have just bought or about to have your first mortgage I would limit your debt as much as possible.

    You can buy cheaper cars that are comfortable.
  • Lover_of_LycraLover_of_Lycra Forumite
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    Jimmy9012 wrote: »
    So, I think we could afford it, I am just not sure it feels sensible. We could get a far older car, but then due to age we get less use of it for the similar investment...

    I think 22k would be about 400 PCM for 5 years...

    What do you think we should do?

    Did you factor in depreciation when reaching that conclusion?

    If this is you buying your first home I wouldn't immediately go committing myself to a loan at £400 pcm for 5 years. Is your partner's condition likely to get to the point where she can no longer continue to work or will require long periods of time off work?

    I would also hold off applying for any new credit until you've completed the purchase of your home or the mortgage lender might withdraw its mortgage offer.
  • Jimmy9012Jimmy9012 Forumite
    38 posts
    When considering affordability, your SOA must be accurate. Do you really have £1,641.01 disposable monthly income left over? Or is your SOA aspirational?

    If you really do have that amount of cash available every month, then I would respectfully recommend you save up for the car, as you will have the lumpsum in no time and will be able to save money on the interest you will pay. You could have the money saved up for the car in just over 13 months... :)

    Edit: Just to add, that if you do have £1,641.01 surplus every month, then how come you have no cash assets? There should be something saved up...

    Yes, this is the correct number - not aspiration. Ideally I would like to do as you say and save to buy the car in 13 months, but the extra 20 minutes each way in the car would very negatively affect her health - so we are looking to get a car that would be better for 1) comfort, and 2) future family.

    What about monthly lease for a year whilst saving?
  • Jimmy9012Jimmy9012 Forumite
    38 posts
    D_M_E wrote: »
    Do you really need to pay £82 monthly for sat/cable - can you go freesat or freeview instead?

    Car - how much spare at 0% left on the card - could this be used to get a cheap car while you save for something better - once got a Granada for £500 which lasted 5 years.

    Also you need to save something for an emergency fund - what would you have to pay with if something, even minor, goes wrong?

    About 900 left available on the card before being at limit. We have a car already, its just not helping her going from 20 minutes each way to work, to 40 minutes each way. The seating kills her back and that hurts her mobility which would deteriorate over time.

    No emergency fund at the moment. But, as soon as the house move is done that will build up. All cash is currently going to the move/deposit.

    The expense for cable is high, but that also includes our 2 x mobile phone bill which is 2 x £12 PCM with Virgin Mobile. I bundle it as the TV/Mobile provider.
  • Jimmy9012Jimmy9012 Forumite
    38 posts
    BakingC wrote: »
    How much deposit did you put down? Is your SOA based on new mortgage? Was rent previously higher as 4.99% seems high for a mortgage rate if your take home as a couple is over 4K so doesn't seem like you had a large deposit relative to your take home.

    Would it be worth considering your partner taking some work closer to home? If their income is only circa £800 a month then they have a car £400 + Petrol, tax, insurance they are only contributing a few hundred a month to the household. Obviously personal choice but just think spending £22k on a car might not be worth it if working closer could help with their health and they could earn just as much / save lots on travelling.

    But echoing other comments every month you delay buying the car you are 1.6K closer to it as you may struggle finding such a large loan even if affordability is fine straight after getting a mortgage so by the time you find a reasonable interest rate you may have 6-7K spent which should buy a reasonably comfortable used car to last for a few years while you save up for a nicer more comfortable one.


    The SOA is based on the new mortgage. We have 95 LTV. We did not have any plans to move/own until very recently (January in fact), so saved fairly hard since then for the 5% deposit. We should move mid July, and this SOA is based on what those costs are set to be.

    What you said is food for thought though, appreciated.
  • Jimmy9012Jimmy9012 Forumite
    38 posts
    Did you factor in depreciation when reaching that conclusion?

    If this is you buying your first home I wouldn't immediately go committing myself to a loan at £400 pcm for 5 years. Is your partner's condition likely to get to the point where she can no longer continue to work or will require long periods of time off work?

    I would also hold off applying for any new credit until you've completed the purchase of your home or the mortgage lender might withdraw its mortgage offer.

    Yes, will hold off on applying for credit until at least then. Her condition can deteriorate quite rapidly, and yes - its possible that eventually she will be unable to work. Thats one of the reasons why helping her comfort to and from work will help her stay out and about and keep her able to work...
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