Does Car Finance Affect Your Mortgage?
We all know that feeling when a new car day is almost upon us. Regardless of how you came about owning your current vehicle, whether it was leased, or financed, or you drive an old car and have enough money saved for something newer; we all get excited when we are about to upgrade our car. But what if you’re also in the process of buying your dream house?
What plenty of people want to know is whether getting a new car on finance will affect your mortgage. Well, the short answer is yes. But let’s dive into it.
Car finance is a form of debt and depending on how you repay it, it will affect your mortgage application. When you apply for a mortgage, lenders will thoroughly go through your financial history, and, if they see you’ve previously taken out finance on a car and there were a few late payments, not only could this negatively impact your credit score, but it may also mean you won’t get the best mortgage rates. On the contrary, if you keep on top of all your payments there shouldn’t be any issue that would damage your credit score.
When you apply for a mortgage, lenders also look at all your monthly outgoings and expenses, so having a car on finance, depending on the repayment costs, will lower the amount you can borrow for your mortgage.
Will having car finance stop you from getting a mortgage?
Having car finance won’t stop you from getting a mortgage. It will, however, be taken into consideration by lenders when they look at your monthly outgoings. If you cannot afford your car and mortgage repayments as well as any other outgoings, the chances of not being able to get accepted on a mortgage deal are quite likely. If you’re looking to apply for a mortgage shortly, it’s a good idea to start reducing any outgoings as much as possible in order to have greater chances of being accepted.
Can you apply for a mortgage and car finance at the same time?
The more financial applications you make in a short space of time, the more these are going to affect you as this behaviour is not sought after by lenders. So, it may be best to apply for a mortgage and car finance at different times. Anytime you apply for some sort of finance you are subjected to a credit check which leaves a footprint on your credit file, so when you’re being credit checked by lenders, they will be able to see from the financial applications you’ve filled in the past, to any time you’ve been denied finance, and this will impact your overall credit score. You can however, for certain applications, have a soft credit check done to see what loans you could possibly be accepted for, but bear in mind that some lenders don’t offer this option.
If you already have a mortgage, will applying for car finance affect this?
No, it will not have any effect on your mortgage, unless you apply for a high finance deal and can no longer afford to pay your mortgage. However, it’s important to note that a high finance deal on a car with large monthly payments will not only affect your mortgage but also your car repayments.
Tags: *car_mortgage *car_finance *car_finance_options