Will a car loan affect mortgage?

harvoo

Hello, i am currently on a sabbatical from work and return in April. I will be returning to my same role and so will my wife. We earn 50k and 30k. We will have no vehicles when returning so i was thinking about getting a 16k loan over 4 years for two cars. Will this affect applying for  a mortgage at the end of year?

TheSpectator

It will certainly affect affodability if you are paying a loan back.

harvoo

TheSpectator said:

It will certainly affect affodability if you are paying a loan back.

Thanks, so if i was looking at a mortgage a lot less than a previous affordability calculator told me it should be okay? 

TheSpectator

harvoo said:

TheSpectator said:

It will certainly affect affodability if you are paying a loan back.

Thanks, so if i was looking at a mortgage a lot less than a previous affordability calculator told me it should be okay? 

Possibly, run your projected figures through it again?

harvoo

TheSpectator said:

harvoo said:

TheSpectator said:

It will certainly affect affodability if you are paying a loan back.

Thanks, so if i was looking at a mortgage a lot less than a previous affordability calculator told me it should be okay? 

Possibly, run your projected figures through it again?

Didn’t even think of that haha, will do thanks 

kingstreet

It is possible that at a lower loan to value, some credit won't impact affordability. On a recent case, a £350 pm commitment didn't reduce the max loan available.

DullGreyGuy

kingstreet said:

It is possible that at a lower loan to value, some credit won't impact affordability. On a recent case, a £350 pm commitment didn't reduce the max loan available.

Not sure what you are saying? 

That if you have a low enough LTV then lenders dont care about affordability and so will lend irresponsibly because they are confident they will get everything reimbursed by repossession or the more general point that if you earn a lot then what the bank thinks you can afford is much higher than what your asking for and so the reduction caused by debts are irrelevant?

kingstreet

No. What I'm saying is, sometimes you see affordability unaffected by a certain amount of credit which appears to be accommodated within an income cap. Let's say a lender will lend 4.49 x income to a particular customer group. That is the overall limit and some credit added to the calculator doesn't impact that. LTV was probably the wrong way of expressing it. LTI would have been a better expression.

kingstreet

As an example, I've stuck a 90% LTV FTB (EPC A/B) purchase in the Halifax calculator. Incomes of £50,000 and £30,000 with a 35 year term. The five year fixed max affordability limit is £440k with no credit. I can add credit of upto £650 pm and the max loan is unaffected.

DullGreyGuy

kingstreet said:

As an example, I've stuck a 90% LTV FTB (EPC A/B) purchase in the Halifax calculator. Incomes of £50,000 and £30,000 with a 35 year term. The five year fixed max affordability limit is £440k with no credit. I can add credit of upto £650 pm and the max loan is unaffected.

Thanks for the clearer explanation... now just need someone from Halifax to explain why  

I guess I understand there being a cycle of debt as stuff needs to be replaced and its reasonable to assume not everyone is going to be at the lowest point when taking out a mortgage so that needs to be baked into the number to consider the almost inevitable future. However £650/month is fairly material and a FTB would be more likely to potentially incurring additional debt after the purchase than someone moving home and even more than someone just remortgaging. 

harvoo

kingstreet said:

As an example, I've stuck a 90% LTV FTB (EPC A/B) purchase in the Halifax calculator. Incomes of £50,000 and £30,000 with a 35 year term. The five year fixed max affordability limit is £440k with no credit. I can add credit of upto £650 pm and the max loan is unaffected.

Thank you, i probably won’t be looking at buying for even half of 440k so hopefully will be okay