Will car finance payments affect how much you can borrow for a mortgage?
Having a car or two on finance will affect how much you can borrow for a mortgage because the monthly payments impact your overall financial situation and debt-to-income ratio.
Mortgage lenders assess your ability to repay the mortgage based on several factors, including your income, existing debts, and credit history.
When you have a car on finance, it represents an additional monthly financial commitment, which is considered when evaluating your eligibility for a mortgage. This added debt reduces the amount you can borrow along with credit cards, loans, private school fees and other ongoing credit commitments. Some lenders may ignore credit commitments if they are due to end soon.
Aaron Strutt, product director at Trinity Financial, says: "Over the years, we have had clients with a range of cars on finance from Fords and Skoda’s to Rolls Royce’s and Mercedes G-wagons. Mortgage lenders use affordability calculators to determine how much they will lend someone, and they all use different figures."
Assess the market to get a more generous mortgage income multiples
Most banks and building societies will lend up to five times single and joint salaries. However, Trinity Financial has access to lenders providing 5.5 times the income for borrowers typically earning over £75,000 or working as a professional like a doctor, dentist or lawyer.
How many people take takes cars on finance? And will their mortgages be affected?
Recent figures show more than four in every five new cars bought by individuals in 2022 were paid for with borrowed money. Figures from the Finance & Leasing Association show the value of new business provided to consumers for new car purchases is expected to grow by 2.1% in 2023 to £17.5 billion, while consumer used car finance new business by value is forecast to fall by 5.7% in 2023 to £22.3 billion.
Call 020 7016 0790 to let our brokers confirm how much you can borrow or book a consultation
The information contained within was correct at the time of publication but is subject to change
Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage
Get started today
Speak to one of our mortgage experts. Book an appointment to come and see us or request one of our experts to call you.
