Will car pcp affect mortgage application

Bm1937

Hi
FTB here. I currently have 3 months left on a car pcp, Im debating on whether to get a small personal loan to pay the balloon payment or send the car back and car share with my partner.

all payments made have been on time, account says in good standing on Experian, my question is will this still be considered on mortgage application when lender look at my debt to income ratio? I literally have my car and a credit card which is cleared every month and my phone bill which is £34 in terms of credit. My car pcp is £250 per month and I occasionally dip into my arranged over draft. 

Thanks 

[Deleted User]

Getting further credit would be a bad move - as is going into your overdraft.  

The car finance will impact on affordability, so the safest thing to do is to get rid of the car, don't get any more credit before completion and lower your costs so you don't need to go into your overdraft. 

How much the finance will impact your affordability depends on the detail, but the overdraft usage suggest things are already tight.

Bm1937

Deleted_User said:

Getting further credit would be a bad move - as is going into your overdraft.  

The car finance will impact on affordability, so the safest thing to do is to get rid of the car, don't get any more credit before completion and lower your costs so you don't need to go into your overdraft. 

How much the finance will impact your affordability depends on the detail, but the overdraft usage suggest things are already tight.

Hi thanks for the reply. I’ve not had any credit in over a year now. I was considering the loan if I am to keep my car because it would actually reduce my monthly payment by £80 per month. 

When they look at bank statements what is it they are actually looking at? If I used an arranged over draft every now and then but cleared it on pay day and managed to save some money would this be viewed good or bad? In the last month I have cancelled all silly DD such as Spotify and Netflix and just have important things such as car phone savings and CC. 

csgohan4

any credit/debt will impact on affordability, you generally can borrow x4.5 of your gross income not including debt.
Requesting more credit before a mortgage application is not wise but your choice. So is dipping into your overdraft frequently, both will be seen as unfavourable when a lender scores you

Grumpy_chap

Showing that you met the car payments reliably will be a positive.
Ending the car payments and reducing your outgoings will increase your affordability of the mortgage.
Why not conclude the current car and end the payments at the normal end of term, share with your partner and then consider a new (or second hand) car after you are settled into the new home for a few months?

csgohan4

to be fair to OP, if after using lender's affordability calculators and despite the new loan, meets affordability it may still be feasible

Bm1937

csgohan4 said:

any credit/debt will impact on affordability, you generally can borrow x4.5 of your gross income not including debt.
Requesting more credit before a mortgage application is not wise but your choice. So is dipping into your overdraft frequently, both will be seen as unfavourable when a lender scores you

Hi thanks for the info! 

Yeah I had read about the 4x thing. It’s a joint application so would it be 4x our wages combined or each? I’m on 23.5 he’s on 24. We have an agreement in principle for 210k. 

Bm1937

Grumpy_chap said:

Showing that you met the car payments reliably will be a positive.
Ending the car payments and reducing your outgoings will increase your affordability of the mortgage.
Why not conclude the current car and end the payments at the normal end of term, share with your partner and then consider a new (or second hand) car after you are settled into the new home for a few months?

Hi thanks for responding.

yes I was looking into a second hand car but everything I looked at it would end up costing me more than what would be with a loan. For example my car insurance is approx 300 a year, I looked at quite a few other cars and the insurance was hitting 900. My car is tax free and I get 600miles out of a tank which costs £55 to fill. I was looking the loan Cos it reduces my payments by a lot and i would be keeping a really reliable car that has never had an issue. 

I’m just hoping the mortgage goes through before September which is around when I would need to get a loan if I kept the car. I was reading somewhere that if the credit agreement has less than 6 months remaining on it lenders do not take it into account at all on affordability. Do you know if this is true?