PCP / Finance - effect on getting mortgage

[sider]

Hi All,

Quick one for you folk in the know.

I've been a Director of my own limited company since September 2014.

Financially, things are going well and I'm happy with the growth and what we've done during that time.

We are looking at purchasing a new house back end of this year, and speaking to various people, it looks like I'm going to need a minimum of 2 years worth of company accounts, showing good growth/turnover/profits/dividends. This shouldn't be too much of an issue (albeit I'm only just finalising Year 1 accounts) as my Year 2 records are tip top and updated immediately and my accountant is aware of our plans. I do appreciate though that a Year end of 30/09/16 won't instantly mean accounts available on 01/10/16!

So hopefully by back end of the year everything will be ok. We've no other debts other than the current mortgage (which is almost in 50% positive equity) and our credit rating appears to be excellent.

HOWEVER, to throw this into the mix:

If I were to take out PCP or HP on a new car over the next few months, perhaps for the car being delivered in early September, would this cripple/seriously hinder any chances of a mortgage?

Any advice greatly appreciated.

Thanks.

[Sarnie]

Will it reduce your lending capacity? yes.

Will it stop you lending the amount you require? No one can tell you that with knowing your income figures and lending requirements alongside details of the HP agreement.

[sider]

Thanks Sarnie.

One thing a sales guy said to me at weekend was, was that a £2k deposit on a £20k car was a good amount of equity for the finance firm to have. As such, they wouldn't credit check me and it wouldn't appear on my record as it didn't need to be secured lending on anything other than the car as they'd have so much money in it if I defaulted. Was I right to instantly assume that this was a load of bull poo to get me to buy a car (which I obviously didn't!)?

[emicen]

sider said:

Thanks Sarnie.

One thing a sales guy said to me at weekend was, was that a £2k deposit on a £20k car was a good amount of equity for the finance firm to have. As such, they wouldn't credit check me and it wouldn't appear on my record as it didn't need to be secured lending on anything other than the car as they'd have so much money in it if I defaulted. Was I right to instantly assume that this was a load of bull poo to get me to buy a car (which I obviously didn't!)?

You get credit checked for a mobile phone contract so I seriously doubt his claim.

[Spuffington]

A PCP will appear on your credit history either way - there WILL be a check, regardless of what deposit goes in. And it will appear as a credit account on your credit file.

That said, providing you keep up the repayments and you don't have multiple checks run on your account previous to that or as a result of getting the PCP, then it should be fine.

But any mortgage lender will naturally take the repayments into account when they do their affordability checks and this will reduce the amount of mortgage they are willing to advance you, accordingly.

[Sarnie]

sider said:

Was I right to instantly assume that this was a load of bull poo to get me to buy a car (which I obviously didn't!)?

Yep!!!

[walm]

sider said:

Thanks Sarnie.

One thing a sales guy said to me at weekend was, was that a £2k deposit on a £20k car was a good amount of equity for the finance firm to have. As such, they wouldn't credit check me and it wouldn't appear on my record as it didn't need to be secured lending on anything other than the car as they'd have so much money in it if I defaulted. Was I right to instantly assume that this was a load of bull poo to get me to buy a car (which I obviously didn't!)?

fk me. And we still get dealers on here claiming they are all whiter-than-white.
I fking HATE dealers. Bunch of lying s. /rant over... and I am sure some of them are lovely.

OP if you have so much equity and might well qualify for incredibly cheap interest rates why not use the money from the mortgage (or strictly use SOME of the equity) on the car purchase?
Can you put it off until then?

[Sarnie]

walm said:

fk me. And we still get dealers on here claiming they are all whiter-than-white.
I fking HATE dealers. Bunch of lying s. /rant over... and I am sure some of them are lovely.

OP if you have so much equity and might well qualify for incredibly cheap interest rates why not use the money from the mortgage (or strictly use SOME of the equity) on the car purchase?
Can you put it off until then?

This was a particular gem;

"was that a £2k deposit on a £20k car was a good amount of equity for the finance firm to have. As such, they wouldn't credit check me and it wouldn't appear on my record as it didn't need to be secured lending on anything other than the car as they'd have so much money in it if I defaulted"

Since when has 10% been a "good amount of equity"? Can it be done with less? Even if it can, I certainly would say it was a "good amount of equity" for the finance company!

"they'd have so much money in it if I defaulted" Really?? I'd expect that 10% Equity to have disappeared in the dealer spread as soon as it's driven off the court............would they give you £18k back the next day if you tried to sell it back to them?

I find it unbelievable that in 2016 there are people out there able to give Financial Advice based lieterally on a bed of lies...........

[sider]

walm said:

Can you put it off until then?

Probably.

Current car is 10 years old this year - so it's not like i've always got to be driving the latest model! A/C doesn't work properly. Looked like i'd been swimming the other week when i got out of it on a warm day.

On 85k but loads of life left in it yet. I'm thinking myself that i can wait a while.

Plus, house move - shifting boxes, seats down, stuff to the tip etc - may as well do it in the older car.

[sider]

Sarnie said:

I find it unbelievable that in 2016 there are people out there able to give Financial Advice based lieterally on a bed of lies...........

And you know - this particular chap sold my wife a car last year - cash deal - and did a decent job. To the point i've been back to him to discuss options for me a couple of times since. He knows i'm only looking and won't sign there and then, at the moment anyway.

However, on Sunday he offered me a deal with PCP @ £352 a month over 36 months. Then said to 'hold on, i'll just speak to the Business Manager because that's with Lender A and Lender B now do offers on that particular car for us'. He stood up, turned his back to me they whispered amongst themselves. In that time, the power of 4G had quickly revealed that i could get a bank loan for nearly £80 a month cheaper than their HP offer (£540 a month). Then said business manager comes back 'Good news, we can get it down to £302 a month. [long pause, quiet voice] over 48 months'.

I like the sound of paying £1824 more!!

Needless to say, it's put me off them slightly. For cash purchases they're great - but their finance looks to be a bit of a money-spinner. (Appreciate that lenders need to make money and fully acknowledge that mind, but there are limits to what folk should be able to do). Someone with half a brain could end up in some serious money trouble with offers like that!

[Granfondo]

Sarnie said:

This was a particular gem;

"was that a £2k deposit on a £20k car was a good amount of equity for the finance firm to have. As such, they wouldn't credit check me and it wouldn't appear on my record as it didn't need to be secured lending on anything other than the car as they'd have so much money in it if I defaulted"

Since when has 10% been a "good amount of equity"? Can it be done with less? Even if it can, I certainly would say it was a "good amount of equity" for the finance company!

"they'd have so much money in it if I defaulted" Really?? I'd expect that 10% Equity to have disappeared in the dealer spread as soon as it's driven off the court............would they give you £18k back the next day if you tried to sell it back to them?

I find it unbelievable that in 2016 there are people out there able to give Financial Advice based lieterally on a bed of lies...........

In the age of the PCP 10% is considered a "good amount" by the SALESMAN due to the fact the mark is borrowing more and putting himself into emmediate negative equity!

[Mattt]

But remember that with a 48 month term you've got the car for 12 months longer...

[ARTiSAN1066]

As has been said several times you're going to be credit checked for any kind of finance so its best to be prepared. I'm self employed and have just obtained a mortgage on my primary residence plus more recently a remortgage on a BTL property I have.

My advice is to be fully prepared and make sure your accounts especially the personal ones are all in order for at least the previous 3 months. They will ask for copy statements and will go through them in detail. For the company accounts they wanted to see three years worth of accounts plus SA302's from HMRC (online copies weren't accepted).

BTW until recently I had an HP loan on a car however it never showed up on any credit reports which I always thought was odd.

[AllyBassman]

Like said previously, they will do a 'hard' credit check which will show up on your credit report. A few of these in close proximity can make mortgage underwriters nervous...

With regards to the actual afordability, when we had our initial meetings with our broker, I was worried that my PCP deal would go against how much I could borrow.

The figures I got back were pretty much the same regardless of the PCP debt (15k) or not. When quizzing the broker, he advised that most lenders have a limit of 'acceptable debt'. So if you're under that magical threshold, it dosen't go against you too much. Plus the dept is secured on a asset, which is different to a bank loan or huge credit card debt. That's my understanding anyway!

I'm no financial advisor, i'm just going off recent experience this year in getting a mortage with my self employed misses.

Edited by AllyBassman on Wednesday 27th April 16:59