Mortgage whilst tied to PCP
Discussion
I am hoping someone with more sense than me can help advise my situation before I talk to a professional financial advisor as I am still waiting since Thursday for my settlement figure on my car.
Situation is I am coming to end of PCP in October and have decided to keep it long term (hoping ten years or more) it is likely a 15k debt that I feel happy to pay to keep.
Now I am kind of thinking that my options could be good in that I have a stable job of 14 years and not having the £450 a month my car currently costs could mean if I borrow my maximum say £115k I could potentially get a mortgage for 25 years and £400 a month possibly meaning that I use the 15k for payment of car debt then putting 100k towards a new house.
Am I mad or is this a good idea? Alternatively I get a loan for £15k then guess if they will give me a mortgage after. which is probably unlikely I guess but I don’t understand how it works.
Interestingly my Experian report came back very good which pleased me but when I asked HSBC they were unable to give me a mortgage.
A bit of a sensitive subject but hopefully someone can help without me publicly airing my finances too much.
Edit
Sorry title needs editing should read using mortgage to pay PCP
Situation is I am coming to end of PCP in October and have decided to keep it long term (hoping ten years or more) it is likely a 15k debt that I feel happy to pay to keep.
Now I am kind of thinking that my options could be good in that I have a stable job of 14 years and not having the £450 a month my car currently costs could mean if I borrow my maximum say £115k I could potentially get a mortgage for 25 years and £400 a month possibly meaning that I use the 15k for payment of car debt then putting 100k towards a new house.
Am I mad or is this a good idea? Alternatively I get a loan for £15k then guess if they will give me a mortgage after. which is probably unlikely I guess but I don’t understand how it works.
Interestingly my Experian report came back very good which pleased me but when I asked HSBC they were unable to give me a mortgage.
A bit of a sensitive subject but hopefully someone can help without me publicly airing my finances too much.
Edit
Sorry title needs editing should read using mortgage to pay PCP
Edited by nick30 on Monday 8th March 19:32
Am I reading this right, you want to borrow 115k for / on a mortgage but use 15k for the car.?
I’m not sure if I am or not, sorry.
Assuming I am then you are basically wanting a say 35 year car loan.
1. Mortgage companies look at risk when lending on a house that’s why the more deposit you put down the better mortgage rate you get. In other words if 2 people buy a 200k house and one puts down 10k deposit the other 50k, then it goes tits up they only have to sell the 50k deposits house for 150 to break even, rather than 190k on the 10k deposit hence less risk.
2. As far as I’m aware 100 percent loans on mortgages are stopping, you want over 100 percent if 15k of it is going on a car so it won’t happen, I don’t think
3. Another factor is APR so a car loan may be more APR but it’s only over say 5 yrs rather than 35, as such it may end up being cheaper than the 15k on the mortgage would be long term anyway (however you need to find more for the 5yrs per month obviously)
4. Lending money at the moment is cheap, really cheap. This is due to the Bank of England setting a low interest rate. Please remember this. A car loan will more than likely be fixed, let’s say at 3.5 % regardless of that being a lot higher than the interest rate it’s still not bad. You also know for 5 yrs you have to pay back x amount. A mortgage will alter at some point, more of an unknown.
Just some points, people may disagree and they may be right I’m not very financially savvy myself to be honest. That’s why I tend not to buy stuff I can’t afford (houses and cars excluded, most people need to lend for obviously).
I’d give the car back and buy a 1500 quid nail. But that’s me we are all different.
I’m not sure if I am or not, sorry.
Assuming I am then you are basically wanting a say 35 year car loan.
1. Mortgage companies look at risk when lending on a house that’s why the more deposit you put down the better mortgage rate you get. In other words if 2 people buy a 200k house and one puts down 10k deposit the other 50k, then it goes tits up they only have to sell the 50k deposits house for 150 to break even, rather than 190k on the 10k deposit hence less risk.
2. As far as I’m aware 100 percent loans on mortgages are stopping, you want over 100 percent if 15k of it is going on a car so it won’t happen, I don’t think
3. Another factor is APR so a car loan may be more APR but it’s only over say 5 yrs rather than 35, as such it may end up being cheaper than the 15k on the mortgage would be long term anyway (however you need to find more for the 5yrs per month obviously)
4. Lending money at the moment is cheap, really cheap. This is due to the Bank of England setting a low interest rate. Please remember this. A car loan will more than likely be fixed, let’s say at 3.5 % regardless of that being a lot higher than the interest rate it’s still not bad. You also know for 5 yrs you have to pay back x amount. A mortgage will alter at some point, more of an unknown.
Just some points, people may disagree and they may be right I’m not very financially savvy myself to be honest. That’s why I tend not to buy stuff I can’t afford (houses and cars excluded, most people need to lend for obviously).
I’d give the car back and buy a 1500 quid nail. But that’s me we are all different.
A mortgage lender lends on the value of the property, not your income. The loan is secured on the property, ie if you default they take it back and sell it to recoup their money. You never see that money, so you can't ream off 15K
If you want to buy the car, you will have to pay the £15k. It sounds like you'll need to borrow it so you're looking at around 250 per month over 5 years.
You will have to declare that to your mortgage provider and it will influence their decision.
How much cash do you have for a deposit?
If you want to buy the car, you will have to pay the £15k. It sounds like you'll need to borrow it so you're looking at around 250 per month over 5 years.
You will have to declare that to your mortgage provider and it will influence their decision.
How much cash do you have for a deposit?
Thanks for your answers. I should buy a s
ttter but yep I am possibly dreaming that I could borrow that much on the back of a sizeable value for my flat. Should be sensible and stop asking the internet!! Haha. Thanks for your input!
Mrs says just get a small loan get rid quickly but I was thinking the more I can borrow the better to upgrade as far as we can, houses around chilterns are not cheap but makes me wonder should I push myself to the max. Just feels like a right time but I will probably be prudent and end up where I am forever! Headscratcher because my daughter is getting bigger and we would all like more space
ttter but yep I am possibly dreaming that I could borrow that much on the back of a sizeable value for my flat. Should be sensible and stop asking the internet!! Haha. Thanks for your input!Mrs says just get a small loan get rid quickly but I was thinking the more I can borrow the better to upgrade as far as we can, houses around chilterns are not cheap but makes me wonder should I push myself to the max. Just feels like a right time but I will probably be prudent and end up where I am forever! Headscratcher because my daughter is getting bigger and we would all like more space
Oh so you own a flat already? If so how much equity is in it? (the difference between your current mortgage remaining and how much it's worth). If you have some equity you could have a second mortgage to borrow more money but again the amount you could borrow will only be a total of ~90% of it's value, so if say you have £100k left on the mortgage and the flat is now worth £150k, you could borrow another ~£35k to take you back up to 90% loan amount.
None of this helps you upgrade to a bigger house though because you can't borrow off your existing flat to spend more on the new house as you'll be selling the old flat in order to move, and if you've borrowed more money against it, you'll have to pay more back and will have less equity to go towards the new house.
Yes Loco but I own my current residence approx 320-340k and one my car debt disappears surely I am good for borrowing a bigger lump at the same time as monthly payments would be less. Surely it makes sense to someone that as I need to clear the car debt can I not borrow more to upgrade my dwelling?
OK perhaps but it's unusual to own outright hence the assumption you had a mortgage 
Even so, borrowing money out of your existing house doesn't help you buy a bigger new house, and any money you spend on the car hinders you. For example...
Flat worth £340k
New house costs £500k
If you buy the new house you'll need a mortgage of £160k (£500k - £340k equity which acts as your deposit)
Now if you take a mortgage on the flat and borrow £115k your equity is now only £225k
You spend £15k on the car so have £100k left over to put into savings that goes towards the new house
When you buy the new house you still need a £15k bigger mortgage of £175k (£500k - £225k equity - £100k in savings).
So yes you can borrow from the equity to buy the car, but there's no point borrowing more than you need to pay off that car debt as it won't help you buy a bigger house.
Even so, borrowing money out of your existing house doesn't help you buy a bigger new house, and any money you spend on the car hinders you. For example...
Flat worth £340k
New house costs £500k
If you buy the new house you'll need a mortgage of £160k (£500k - £340k equity which acts as your deposit)
Now if you take a mortgage on the flat and borrow £115k your equity is now only £225k
You spend £15k on the car so have £100k left over to put into savings that goes towards the new house
When you buy the new house you still need a £15k bigger mortgage of £175k (£500k - £225k equity - £100k in savings).
So yes you can borrow from the equity to buy the car, but there's no point borrowing more than you need to pay off that car debt as it won't help you buy a bigger house.
Really appreciate your help thanks. So are you saying I need to really just pay the car debt first then look? My thought process was to amalgamate some new debt and move quickly whist stamp duty is from over 500k in June and was thinking to try and get in quickly before I miss the boat. I am trying to be sensible but it’s quite confusing.
With a 340k deposit on a 500k house, that's a very good loan to value so you shoudl be able to secure a mortgage easily enough if you and wife both employed with stable incomes.
Ignore the car it's a complication that's not necessary. When teh PCP ends in October, jsut get a normal loan to buy it and keep it, or hand it back and get another PCP car or a cheaper car.
Or when you sell the 340k house, use just 325k for the new house and borrow 175k mortgage, gives you 15k cash release to pay off the car.
Ignore the car it's a complication that's not necessary. When teh PCP ends in October, jsut get a normal loan to buy it and keep it, or hand it back and get another PCP car or a cheaper car.
Or when you sell the 340k house, use just 325k for the new house and borrow 175k mortgage, gives you 15k cash release to pay off the car.
You'll struggle to catch the full stamp duty discount at this stage, even if you could sell to a first time buyer and buy from someone who's not in an onward chain and all that happened tomorrow, you're probably looking at a 3-4 month sale process to complete the sale (the date the discount applies). I think there's still a lower amount of discount until September(?) though so it's not a hard stop so might still be possible to benefit to a degree.
If you want to keep the car you've obviously got to clear that debt one way or other, it may be that borrowing £15k from your house with a small mortgage to clear that debt means you could borrow against a higher priced house than if you had a personal loan and a large monthly outgoing, but you'll need a £15k bigger mortgage than you otherwise would have done so you'd probably need to speak to a mortgage advisor to do the sums of how much lenders will lend in each scenario.
If you want to keep the car you've obviously got to clear that debt one way or other, it may be that borrowing £15k from your house with a small mortgage to clear that debt means you could borrow against a higher priced house than if you had a personal loan and a large monthly outgoing, but you'll need a £15k bigger mortgage than you otherwise would have done so you'd probably need to speak to a mortgage advisor to do the sums of how much lenders will lend in each scenario.
Macneil said:
A mortgage lender lends on the value of the property, not your income. The loan is secured on the property, ie if you default they take it back and sell it to recoup their money. You never see that money, so you can't ream off 15K
If you want to buy the car, you will have to pay the £15k. It sounds like you'll need to borrow it so you're looking at around 250 per month over 5 years.
You will have to declare that to your mortgage provider and it will influence their decision.
How much cash do you have for a deposit?
Not entirely true, They also take into account your financial commitments. They wont lend you more than you earn .If you want to buy the car, you will have to pay the £15k. It sounds like you'll need to borrow it so you're looking at around 250 per month over 5 years.
You will have to declare that to your mortgage provider and it will influence their decision.
How much cash do you have for a deposit?
I think they call it capacity to pay back the loan?
Edited by tedblog on Tuesday 9th March 07:47
Sell the car and get rid of the debt, then focus on the house move. I did similar about 5 years ago and got rid of all my debt to enable me to borrow the amount I needed for our house move. I bought a £1k saab 93 aero which turned out to be one of the most enjoyable and dependable cars I've owned.
Once I renovated the house I was able to get back into cars as a hobby and have 4 now.
Once I renovated the house I was able to get back into cars as a hobby and have 4 now.
croissant said:
Sell the car and get rid of the debt, then focus on the house move. I did similar about 5 years ago and got rid of all my debt to enable me to borrow the amount I needed for our house move. I bought a £1k saab 93 aero which turned out to be one of the most enjoyable and dependable cars I've owned.
Once I renovated the house I was able to get back into cars as a hobby and have 4 now.
I know this is the sensible approach but when I bought the car new 3.5 years ago I said to myself after only a short period of time that this one is a keeper and I want to stick to that. To me it’s worth more than 15k. Especially when I have got this far with no shortcuts it’s been well looked after although currently dirty!!Once I renovated the house I was able to get back into cars as a hobby and have 4 now.
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