Car Finance & Mortgages

allacesal

Hi guys,

Does anybody know whether the type of car finance I apply for before applying for our next mortgage will affect my affordability? For instance I lease my car at the moment and it will expire in Sept, and we’ll probably be looking to move house after this date as we are expecting baby #2 in Sept.
Buying a car isn’t an option so I’m looking at either PCP/PCH or Hire Purchase (car loan to buy) but wondered if either type will have more of a detrimental affect on our mortgage offer??
As we are looking at houses at the very top of our budget/affordability we need the best offer we can get.
Thanks in advance!

ACG

Lenders only use the term remaining and the monthly repayments. PCP/Lease/Car loan etc make no odds to the outcome of the application.

Brock_and_Roll

Given what the OP says about wanting to get the highest possible mortgage, I would would avoid any on-record financial commitment.

A £300pm car lease/hp commitment could potential knock £16k or so off a potential mortgage offer.

Personally, I would "make do" and buy a 2nd hand car for £1.5 or so until at least after the new house purchase. Plenty of reliable cars around in this bracket.

Whats_your_forte

Would just raise another issue which seems to have been missed in the other replies

Sometimes on a Lease/Hp agreement, the level of debt might be an issue in terms of debt to income ratios.

Had one a few years ago with a £90k car showing on the credit file and although the client was simply able to hand the car back at anytime, it caused issues with the lender as they saw unsecured credit liabilities on the credit file at this level.

[Deleted User]

Depends on income levels as well. Lenders will look at affordability for basic stuff like council tax, gas/elec, mobile phone, travel costs. These tend to be fairly fixed costs for the most part. Someone qho takes home £5k a month will still have roughly the same council tax bill as someone on £2k a month.

In practice this means that higher income earners end up with more disposable income in the lenders eyes, so adding commitments might not reduce the loan amount. If you have a lower income and take finances, the lender might see that your disposable income has reduced to a level where the borrowing is no longer sustainable.

Also, some lenders are more comfortable with debt than others so you might stick the same numbers in to different lenders calculators and get massively different results

You can either see a broker to run some numbers, or just go to a few lenders websites and stick the numbers in with and without the car finance and see what happens

foxy-stoat

allacesal wrote: »

Buying a car isn’t an option

Is that because you must have a less than 3 year old car that you cannot afford without leasing/PCP deal and theres no way on this plant that you would drive anything cheaper?

If your overstretching when you buy your home then maybe you shouldn't do the same with your chosen method of transport.

Brock_and_Roll

See previous post by OP:

https://forums.moneysavingexpert.com/discussion/6066689/which-banks-take-100-of-your-earned-commission-when-you-apply

a) high level of commission might be issue for some lenders

b) works in sales so may be real/perceived need to have new car, high mileage etc

kingstreet

We've had issues with Halifax over PCP balloon payments skewing their debt to income ratios.

[Deleted User]

kingstreet wrote: »

We've had issues with Halifax over PCP balloon payments skewing their debt to income ratios.

Accord for me. 75k range rover for £400 a month, completely affordable monthly but the balloon payment just threw it right out. And Accord were adamant that they didnt have adebt to income ratio when i called them. Bang head against the desk seems to be the only way forward sometimes

allacesal

foxy-stoat wrote: »

Is that because you must have a less than 3 year old car that you cannot afford without leasing/PCP deal and theres no way on this plant that you would drive anything cheaper?

If your overstretching when you buy your home then maybe you shouldn't do the same with your chosen method of transport.

Haha I love this response but it's a bit off the mark. We recently purchased a new (2nd hand) car for my wife as her little mini wasn't cutting it with a baby and the payments for that have just finished, leaving us without much leftover.
I wouldn't usually rush through trying to juggle buying a new car at the same time as moving and at the same time as having a second baby but... my wife is a teacher so she has a very specific area of town in mind to get access to the best schools, hense needing the best mortgage offer possible. It just so happens that my current PCH lease deal ends in Sept so the need for another car is there too.