Remortgaging and financing a new car

[winshent]

Credit Score and financing a new car

Not sure if this should sit in here but anyway..

In terms of credit score when remortgaging, whats more favourable... leasing or another purchase payment plan..

Ideally I'd like to buy a car outright.. So a 25k loan + deposit..

Do mortgage companies just look at the monthly commitments or the total debt ?

How is a car lease viewed.. EG if the two year lease totals 6k... then just a 6k debt to be paid ?

Edited by winshent on Monday 26th September 13:59

[SystemParanoia]

not sure if serious ..

you want to refinance your home to buy a depreciating asset ?

[Zoon]

Nothing else to add.
But financially it is a ridiculous idea.

[winshent]

No

Where did I say i was remortgaging to finance a car?

I will be remortgaging in December...

I also want to get a new car.. This could either be by leasing.. personal loan or another type of plan..

What type of the above has least affect on credit score..

[sidicks]

SystemParanoia said:

not sure if serious ..

you want to refinance your home to buy a depreciating asset ?

Economically it makes no difference:
The car will depreciate however it is funded
The OP needs finance to fund the purchase of the car
A re-mortgage is likely to be the cheapest form of finance.

What the OP should not do is align the extra borrowing with the outstanding term of the mortgage, effectively borrowing for a long period (and hence incurring significant interest charges) even if the borrowing is at a low rate.

Paying the mortgage borrowing back as quickly as possible would be the cheapest way forward.

[Sarnie]

winshent said:

No

Where did I say i was remortgaging to finance a car?

I will be remortgaging in December...

I also want to get a new car.. This could either be by leasing.. personal loan or another type of plan..

What type of the above has least affect on credit score..

The main issue predominantly is affordability. Therefore the size of the monthly payment is key, not the amount of debt owed.

[winshent]

Think I need to retitle this post.

[winshent]

Sarnie said:

The main issue predominantly is affordability. Therefore the size of the monthly payment is key, not the amount of debt owed.

Thanks. That's the answer I am looking for.

Thread closed.

[Ste1987]

I'm sure I've read somewhere on this forum that personal contract leasing is the best for your credit score, something to do with it only shows the total you'll be paying over the term of the lease, unlike a PCP where it shows the total amount of credit, if you understand what I mean?

[winshent]

Ste1987 said:

I'm sure I've read somewhere on this forum that personal contract leasing is the best for your credit score, something to do with it only shows the total you'll be paying over the term of the lease, unlike a PCP where it shows the total amount of credit, if you understand what I mean?

Okay.. So the debt also is a factor...

Surely it must be as otherwise minimum payment on credit cards would form part of the affordability calculations..

[Zoon]

So they key is to remortgage first and keep your current car until the new mortgage has been approved.

[NickCW]

Best bet is to use some online calculators and see how this affects things, for instance a higher monthly payment over a shorter term might mean you can't borrow as much as a lower monthly payment over a longer term - affordability calcs etc.

[Sarnie]

winshent said:

Surely it must be as otherwise minimum payment on credit cards would form part of the affordability calculations..

....They do.

[NickCQ]

sidicks said:

What the OP should not do is align the extra borrowing with the outstanding term of the mortgage, effectively borrowing for a long period (and hence incurring significant interest charges) even if the borrowing is at a low rate.

This is not great advice. As long as you don't have prepayment penalties on your mortgage you are better off financing the car with your mortgage and applying the monthly payment that you would have made for the car to your mortgage. Of course, if you only pay the interest on the additional borrowing then you'll pay more in the long run (although there is time value to be considered, depending on your personal cost of capital).

[sidicks]

NickCQ said:

This is not great advice.

Please explain?

NickCQ said:

As long as you don't have prepayment penalties on your mortgage you are better off financing the car with your mortgage and applying the monthly payment that you would have made for the car to your mortgage. Of course, if you only pay the interest on the additional borrowing then you'll pay more in the long run (although there is time value to be considered, depending on your personal cost of capital).

Which is basically what I've said - where is the confusion?

[NickCQ]

sidicks said:

Which is basically what I've said - where is the confusion?

Ok, think I misread you. Was just making the point that comparing loan products with very different durations on the sole criteria of total interest payble is a touch simplistic.

[sidicks]

NickCQ said:

Ok, think I misread you. Was just making the point that comparing loan products with very different durations on the sole criteria of total interest payble is a touch simplistic.

Yes, APR is the appropriate way of comparing the true 'cost' of a loan, but my point was that if you just add the car loan to the mortgage, although the interest rate may be very low, if you pay the car off over the same period as the mortgage you could pay 100% or more of the value of the car in interest payments alone, even if the interest rate is quite 'reasonable'. Hence my recommendation to pay off the capital as quickly as possible.

I think that was basically the same point that you are making!

[red_slr]

Monthly cost will come off your affordability.
If you are close to the limit then I would wait.
If you have no issue with affordability then I would say no real issue, although its generally said on MSE etal that its not a good idea to take out new finance within 3 months of application. How true that is I don't know but seen it mentioned a lot.

[Rangeroverover]

Is your question,

1) I want a new car
2) What method of financing it will have the least detrimental effect on my eligibility when I want to remortgage in the near future

If that is your question,,,,,err I dunno, but am interested in the answer

PS to all those people who are talking of "why are you buying a diminishing assett".............It's because I like cars and am happy to live my life in a way that isn't 100% focused on being the wealthiest in the graveyard.....sorry

[winshent]

Rangeroverover said:

Is your question,

1) I want a new car
2) What method of financing it will have the least detrimental effect on my eligibility when I want to remortgage in the near future

Yes, exactly that.. i think the title was a bit misleading, hence bold title at top of opening post..