Frederick Jace
Most people want a car and a home but having both at the same time sometimes proves difficult without support. For example, to purchase your home, you’ll most likely take out a mortgage. And now, more people are turning to car finance as a way to get your car of choice without breaking the bank. Some providers of car finance will accept bad credit too, so having a car is even more accessible. However, you might be concerned that having another form of finance on your account can impact your mortgage. Find out more below and we’ll explain how car finance can affect it.
Does Car Finance Affect My Credit Score?
Your credit score shows any finance that you’ve borrowed over the years, and it will also show if you’ve missed repayments. This means that if you opt to lease a car through finance, this will show up on your credit score and if you miss the payments, it could have a negative effect. Typically, if you have a bad credit score, it can be harder to get the mortgage you want. The mortgages that you could get, might have higher interest rates too as you’re deemed a risk to lend to. On the other hand, if you ensure your finance payments are made on time, it could help improve your credit score which might help your chances of getting a mortgage.
Can It Impact My Affordability Assessment?
When you apply for a mortgage, lenders will request information about all your outgoings. This is so they can assess your affordability. If you’re paying back a high amount for your car each month, this could affect the mortgage rate that you get. Some mortgage advisors might ask you if it’s possible to pay off your finance before applying for a mortgage, as this could potentially mean you get a better rate.
Will Car Finance Prevent Me From Being Accepted?
Having a car on finance doesn’t mean you’ll get automatically rejected when you apply for a mortgage. However, it could possibly increase your chances of being rejected. If your repayments are regularly late or missed, then it demonstrates that you might not be able to afford the mortgage either. More often than not, the higher amount you pay for your car finance, the lower the mortgage that’s offered to you as your affordability might show you only have enough for one, not the other.
How Can I Manage My Car Finance And Mortgage?
Getting car finance won’t affect your mortgage if you take the former out after the latter. But if you’re taking out car finance before getting a mortgage, make sure you opt for a vehicle that you can afford in the long run. You might think paying towards the higher end of the hundreds is easy now, but when it comes to applying for a mortgage, this could potentially hinder you. When you apply for a mortgage, you need to prove to the lender that you can easily afford it but having a high-value car finance payment each month might do the opposite. Make sure that you pay your car finance on time too, this way you’ll be able to demonstrate your affordability to the mortgage lender.
Ultimately, car finance can affect your application for a mortgage, but only before you apply for it. Having lots of different types of finance can be hard to stay on top of, so make sure you choose an affordable vehicle. This way you aren’t adding too much to any existing debt. Sometimes, it might even be best to delay your mortgage application until you’ve paid off your finance so that you can hopefully get the mortgage you want. If you’re ever unsure, don’t be afraid to ask questions to the lenders so you can feel secure in your decisions.
