Car finance effect on Mortgage?

[Easty-5]

I will be looking into purchasing my first property with my better half in the next 18-24 months, still saving for a deposit at present. I have been doing a bit of car shopping recently and was wondering what the effects of having car finance will be on any mortgage application. At present none of us are in any debt what so ever, we only have phone bills and gym membership coming out each month.

Doing the sums I could easily afford the 200-300 a month on repayments aswell as saving as much as I am. I don't want to plump every last penny I have into saving as I'd still like to live a little, as once we have a house then obviously disposible income will be slashed dramatically.

Is it a stupid idea to even consider buying a new car on finance whilst saving for a house?

[scotal]

Assuming you still have the debt, the monthly payment will be taken as a commitment, it will affect your affordability, and therefore the maximum amount the lender will let you have on mortgage.

[Easty-5]

scotal said:

Assuming you still have the debt, the monthly payment will be taken as a commitment, it will affect your affordability, and therefore the maximum amount the lender will let you have on mortgage.

Let's, for talking sake, say the finance would be £250 a month. How much is it likely to effect the borrowing amount by? At the moment, the £250 is purely disposable income. I wouldn't want to borrow the most I possibly could if it was going to leave me with zero disposable income.

Would a having a mortgage make it much harder to get car finance? I am basically just trying to figure out if its better to get a new car now, or wait until I have a house.

[illmonkey]

Easty-5 said:

scotal said:

Assuming you still have the debt, the monthly payment will be taken as a commitment, it will affect your affordability, and therefore the maximum amount the lender will let you have on mortgage.

Let's, for talking sake, say the finance would be £250 a month. How much is it likely to effect the borrowing amount by? At the moment, the £250 is purely disposable income. I wouldn't want to borrow the most I possibly could if it was going to leave me with zero disposable income.

Would a having a mortgage make it much harder to get car finance? I am basically just trying to figure out if its better to get a new car now, or wait until I have a house.

Fill this in: http://affordabilitycalculator.cheltglos.co.uk/con...

Should give you a rough idea on how if effects it.

[Sarnie]

Easty-5 said:

Let's, for talking sake, say the finance would be £250 a month. How much is it likely to effect the borrowing amount by? At the moment, the £250 is purely disposable income. I wouldn't want to borrow the most I possibly could if it was going to leave me with zero disposable income.

Would a having a mortgage make it much harder to get car finance? I am basically just trying to figure out if its better to get a new car now, or wait until I have a house.

The mortgage company will annualise the monthly finance payment and deduct it from your annual income.

Rough example:

Your salary is £20k
Income multiple is 4 times income

Max mortgage would therefore be £80k.

With finance taken into account:

Your salary is £20k
Annual finance is £3k

Therefore £20k-£3k = £17k

£17k x 4 = £68k max mortgage

From an underwriting point of view, it would be easier for you to get the car finance when you have zero commitments, as as long as your income after the finance deduction is enough for what you want to borrow, then securing a mortgage shouldn't be a problem.

Securing the finance when you have a large debt and monthly payment is going to be more difficult but not impossible by any means.

That being said, the house should be number one priority really. Get the nice house and the nice car afterwards.......

[mcflurry]

Once you have the house, you can wave goodbye to the shiny car

[Easty-5]

mcflurry said:

Once you have the house, you can wave goodbye to the shiny car

Yip, that was my thinking. However, I don't want to wave goodbye to that house either. I think we need to save approx 30k. We have 10K at the moment which we have saved over the last 6-7months.We are saving the bare minimum of 1k a month at the moment. I start a new job next week that will add at least 1k onto my salary P/M most months, depending how busy I am. So, I could obviously plow more money into saving for a house, but I can't help but think that i should also enjoy some of it now whilst I am still young/commitment free.

[VTECMatt]

Buy the house relook at your finances buy shiny car if you can afford it. Might sound boring but running a house isn't cheap.

[scotal]

Sarnie said:

That being said, the house should be number one priority really. Get the nice house and the nice car afterwards.......

Nominally I agree with Sarnie, this is good financial advice, and apart from that plain common sense. However, our accountant, who was a very sensible man, walked into a meeting yesterday, had a heart attack and died. He was 4 or 5 years older than me. You are only here once, and lifes too short are phrases that I've heard about 30 times inthe last 24 hours.

IF you are buying a once in a lifetime car, or a special car, maybe you should do it now, rather than regret it later.
If you are buying some stbox depreciation monster, concentrate on the house.

[Tino]

Lots of fun cars out there for under 2k. A mate rcently bought a stonking Clio 172 Cup for 1650. Its a great car to drive!
getting a house doesn't suddeenly ruin you financially. If you budget well, you might find that its very affordable, especially if you are currently renting.
Ths only way I would spend money on a car in this stage of my life, would be if it were a car that would recoup its cost come resale. run it whilst saving up and then sell just before the purchase of the house
Stick that £300PCM in a seperate account, and once the house is bought, reconsider either spending on that, or the car of your dreams, or just buy the house earlier

[Easty-5]

All really good advice, thanks.

I am only 22 at the moment, still living at home so pay minimal dig. I have. Good car at present (low milage Clio 182), and the car I'm looking at is a new Clio sport 200. I have been offered one on PCP at £290pm, 48 months with £5800 balloon payment and £2400 deposit (200 cash 2200 for my car).

I can afford it on my basic, but then i get my offshore bonus's too.

I'm unsure what to do at the moment.

[CaptainSlow]

Stick with the 182 and save more towards your house deposit.

[eliot]

As others have said, they will anualise the monthly payments and remove from your top line. I'm no expert as i'm only on my 3rd house[mortgage] in 20 years - but my most recent purchase i noticed that they were significantly more diligent than they have been on the previos two.

As for the car - just consider that the £298 PCP is just a representation of how much the car is depreciating every month. 48 x £298 comes to £14k - which is a significant chunk of that 30k you are looking to save. The baloon payment along with your initial deposit is just a representation of how much a four year old clio will be worth in four years. (Give or take)

[theboyfold]

scotal said:

Nominally I agree with Sarnie, this is good financial advice, and apart from that plain common sense. However, our accountant, who was a very sensible man, walked into a meeting yesterday, had a heart attack and died. He was 4 or 5 years older than me. You are only here once, and lifes too short are phrases that I've heard about 30 times inthe last 24 hours.

IF you are buying a once in a lifetime car, or a special car, maybe you should do it now, rather than regret it later.
If you are buying some stbox depreciation monster, concentrate on the house.

This would explain why most of our emails are talking about what cars I should buy instead of moving to the family home! The wife still isn't buying into the idea that we can all live in a GT3RS, even if it is in orange with black wheels!

[anonymous-user]

Easty-5 said:

All really good advice, thanks.

I am only 22 at the moment, still living at home so pay minimal dig. I have. Good car at present (low milage Clio 182), and the car I'm looking at is a new Clio sport 200. I have been offered one on PCP at £290pm, 48 months with £5800 balloon payment and £2400 deposit (200 cash 2200 for my car).

I can afford it on my basic, but then i get my offshore bonus's too.

I'm unsure what to do at the moment.

How much time are you going to be spending offshore? No point in having a new car sitting around depreciating if you can't use it. I know somebody who works on the rigs month on month off, leases a Porsche he can only use every other month and has an interest only mortgage, bloody madness!!!

[Tino]

Easty-5 said:

All really good advice, thanks.

I am only 22 at the moment, still living at home so pay minimal dig. I have. Good car at present (low milage Clio 182), and the car I'm looking at is a new Clio sport 200. I have been offered one on PCP at £290pm, 48 months with £5800 balloon payment and £2400 deposit (200 cash 2200 for my car).

I can afford it on my basic, but then i get my offshore bonus's too.

I'm unsure what to do at the moment.

Whan I was looking at mortgages, the banks would not consider bonus when working out what tehy would lend you, unless you could prove that you had recieved a similiar bonus for about 3 years running IIRC.
Also has a work collegue that had owned a 182 cup win baby blue with the Gordini stripes(unusual as teh man is in his forties)from new. Anyway he PX'd it against a new at the time 197,and wished he hadn't.
I know its the boring answer, but you're young, and have plenty of time to buy a nice motor.

[0a]

Probably teaching egg sucking here but it might be worth signing up for the free credit report trial with Experian - you'd be surprised how many people have missing or incorrect data there.

Remember to cancel via phone and note the date/time.

[jdw1234]

The car payment would be a nice shelter against any interest rate rises.

I would stick with the Clio you have - I really think you will regret it.

Also, the car will effect be double financed as you will be paying the interest on the portion of the mortgage you could have paid off, plus car payment interest.

What if you get the missus pregnant?!!!

[Stevemr]

Little warning bells ringing at " we have no debt" I see a lot of clients who have been "brought up right" not to have any debt! This means that when they come to get a mortgage there is no track record. If you are a few months off getting a mortgage its worth getting a credit card each with a fairly low limit, say a £1000, using it for fuel and repaying it in full each month.
May also be worth borrowing a couple of grand and repaying over 12 months, sounds stupid, but you are helping to build your credit record up and that helps big time when it comes to getting a mortgage.

[Easty-5]

Stevemr said:

Little warning bells ringing at " we have no debt" I see a lot of clients who have been "brought up right" not to have any debt! This means that when they come to get a mortgage there is no track record. If you are a few months off getting a mortgage its worth getting a credit card each with a fairly low limit, say a £1000, using it for fuel and repaying it in full each month.
May also be worth borrowing a couple of grand and repaying over 12 months, sounds stupid, but you are helping to build your credit record up and that helps big time when it comes to getting a mortgage.

We both have credit cards, just nothing on them. We have used them in the past and i still use mine occasionally for online purchases. I have also had 2 loans in the past, which were paid off early. So i do have a record of borrowing money and repaying it so I should be okay. However my GF has never had any debt and she has only used her credit card once or twice. Hopefully it won't count against us.

On another note, I have decided not to buy a new car. I reckon it just a fad and i would seriously regret it once the novelty had worn off. Just going to.keep focused on the house for the time being. Thanks for the advice.