Should I get car finance when I am looking to get a mortgage?
If you are looking to get a mortgage, you may be wondering whether or not getting car finance will affect it. The short answer is yes, it will have an impact, but we have put together a guide so you can find out everything you need to know.
First of all, it is worth assessing how soon you are looking to get a mortgage. If it is in the very near future and the wheels are in motion, then you should not be taking out any agreements without consulting with your mortgage advisor, as taking out a new agreement or spending a large sum of money can really hinder the process and everything is always subject to change.
However, if you are considering a mortgage in the future but don’t have any plans as yet, there are some other things to consider. Car finance can impact your chances of getting a mortgage but don’t panic, there are ways around it and as long as you have the information, you can then make your decision.
Car finance is classed as a form of debt, so this will be considered when you apply for a mortgage. If you miss your payments or you are late with them, then that is going to have a negative impact on your file. If you keep up with repayments, it may not have too much of an effect, but every lender is different, that is true of both mortgages and car finance!
Here are a few things to consider…
The application
When applying for a mortgage, they will look at what you earn and what you spend. If they can see debt on your file already, in the form of car finance, they may be less inclined to lend you a larger sum of money, or the interest may be higher than usual…
The repayments
You will need to make sure you can afford the repayments on both your finance and your mortgage, but if you are confident that this is possible and you can show this to the mortgage provider, there should not be an issue.
The credit score
Missing payments on your car finance will harm your credit rating, which can mean you don’t get access to better deals when it comes to mortgages, and if you consistently miss payments or are late with them, there can be more severe consequences that would hinder your chances of getting a mortgage.
Obviously, we are talking about the worst case scenario here, and if you stay on top of your finances and have the means to pay for both, then you should not encounter real issues here. Car finance can be a more accessible way of getting a new used car, and the money you would have put into buying outright, could be used to save for your deposit, or added to the house pot. As with all financial agreements, it is best to do your own research and to work out what you can afford. There are lots of resources out there and if you are looking at mortgages, speak to a specialist.
If you are thinking more about car finance, we have finance teams in house who will be able to advise further, so to find out more, get in touch with us at Hilton Garage.