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In the process of applying for a mortgage when my 10 year old car gets written off by a lorry.
I suggested using the insurance payout to buy a runaround, wife would rather get a new car on PCP so that we don't have any unforeseen costs.
Can a PCP application make a difference to the mortgage application? It's been mentioned that pcp can affect it but leasing won't..
Any input/thoughts?
I’m pretty sure they’ll both be considered as they will both affect your monthly outgoings, unlike buying outright which is a done deal.
Anything that will be a financial drain for longer than a couple of months will be taken into account and deducted from your disposable salary.
Several hundred pounds a month off your income will be sizable chunk in a year. If you are close to the edge of 'affordability' it will be a big risk.
Buy the banger; you can sign up to the lifestyle vehicle afterwards if you still think it important
Surely a new car on any kind of finance is going to mean increased monthly outgoings so would therefore affect the mortgage application?
Do you always do what your wife says?
Buy a cheap run around then once mortgage and such is sorted reasses, keep run about or sell and get something new on pcp or buy using run about as a deposit.
All of this kind of monthly outgoings will have an effect. As above, if you think you are that close to the mark in terms of affordability, get the run-around, then reassess what kind of car you are sure you can afford once the mortgage is in place.
pcp or lease or hp or loan, all are a financial commitment and will affect any mortgage application.
Yes, they do have an effect, I know from experience.
Also the amount is the total amount including the GMFV and interest, not just the bit you'll be paying for the term. Basically, if it shows on your credit report, then it counts for mortgage lending criteria.
I’m think the whole value of the car on a pcp counts as a loan in your name for the duration of the pcp, ie if you get a new 3 series on pcp your credit file will show a £35000 odd loan in your name and will reduce your borrowing amount by that amount.
I went through similar not too long ago.
It was strongly recommended to me that I hold off purchasing a car until the mortgage was sorted.
A month after the exchange I applied for a PCH car but was rejected despite having a very good credit history. The dealer followed up with the leasing company for some sort of explanation why - they wouldn't accept me for 12 months due to the recent mortgage.
Ended up getting a PCP car sorted elsewhere afterwards, it must depend on different lenders and their criteria.
To calculate affordability they generally multiply and monthly debt outgoings by 12 and deduct that from your salary and use that as a starting point.
So if the pcp payment were £200 p/m they'd deduct £2400 from your salary.
I'm also a bit confused why going pcp means no unexpected costs. A lot of pcp plans still require you to maintain the car and things can go wrong with new ones just as old ones with some stuff being out side of the warranty.
Sure, it's less likely that there'll be an unexpected bill but not inconceivable.
Having just re-mortgaged I wouldn’t dream of signing up to PCP before the mortgage. I had a 90 minute interview down to minute detail of my attitude to credit, did I understand compound interest, every single direct debit I had had to be justified.
I was nowhere near any of their boundaries for the LTV, I imagine if you were a PCP would be an huge issue.