PCH v Mortgage

[Moley RUFC]

My place of work for the last 9 years have decided to go away from the company car list and instead offer 3 or 4 basic cars ; VW Passat, V40 Volvo SE, i40 Hyundai and an Octavia Elegance. Even though my current vRS is no 458 it's still a nicer place to be than the current company car options above.

The other option is via LOFM (Leasing Options Fleet Management) where the deal is a PCH over 3 years tailored to my average mileage. Ideally I want another vRS but this time an estate and the deal they have done which takes shows me about £100 a year better off than my current vRS as a company car by the time the tax comes off, business fuel is paid etc.

My concern is we are about to sign up for a new house as a part exchange on our current one ready to move next April.

Will this PCH deal have an affect on my mortgage amount even though in essence I'm actually better off per year on a PCH against a company car?

Edited by Moley RUFC on Tuesday 12th November 09:01

[Sarnie]

Yes.

Any credit commitment at all, that will remain once the mortgage completes, will be deducted by the lender from your income, thus reducing your lending capacity.

Whether that negatively affects your chances of securing a mortgage will be dictated by the figures involved eg your incomes Vs required mortgage.

[AGK]

What sarnie said.

"computer said no" with me even though cost of the car + mortgage = less than what I was paying in rent never mind rent + car.

[Moley RUFC]

Sarnie said:

Yes.

Any credit commitment at all, that will remain once the mortgage completes, will be deducted by the lender from your income, thus reducing your lending capacity.

Whether that negatively affects your chances of securing a mortgage will be dictated by the figures involved eg your incomes Vs required mortgage.

So even if I can show that I'm £100 a year better off then the cost if the car (£25k) will be chalked off the lending amount?

[Sarnie]

Moley RUFC said:

So even if I can show that I'm £100 a year better off then the cost if the car (£25k) will be chalked off the lending amount?

You can't "show" a lender anything, it doesn't work like that.

The decisioning systems work in a black and white fashion, with no opportunity to explain figures. The figures either fit or they don't.

Also, I never said the cost of the car would be reduced off your borrowing amount, it's based on the monthly payment.

For example, if it's a lender who will give you 5x income for your borrowing, they will apply the same weighting for commitments. So if the PCH is £400 per month, they will;

£400 x 12 = £4,800 per year.

£4,800 x 5 = £24,000 that they would reduce your borrowing by.

The same as above applies to the monthly payments on any credit cards or other loans you have. Some lenders will also take into account overdraft balances and student loans as commitments.

[Moley RUFC]

Understood. Back to my Lotus Exige by 40 plan and get a company barge whilst saving!

[blank]

Use some online affordability calculators to check if it will make the mortgage you want un-obtainable i.e. if your salary is £100k and you want to borrow £80k I doubt it will stop you! But if your salary is £20k and you want to borrow £100k then it probably will.

I had the same situation. My £250 per month car lease (which I make a small profit on thanks to business mileage expenses and tax relief) cost me an extra £30k up front buying my house. The expenses etc don't count as income so can't be used to offset it.

[Moley RUFC]

I think I'm going to stick with my current car (if the company agree to extend the lease) then get the mortgage and house sorted and once done look into then when I won't have the scrutiny over my incomings and outgoings.

[Moley RUFC]

The day is getting close for sending the car back and deciding what to do is paramount over the next few weeks. Think I'm going to ensure any PCH deal I do is after I move in and then will finish within 6 months of my mortgage deal so not to affect my next mortgage.