Recent research shows that lenders are penalising customers who have purchased a vehicle on finance when they submit a mortgage application.
According to Money Mail, lenders are reducing the amount they are willing to lend by up to £35,000 in some cases where a car loan is in existence. As many as 6,300 people take out a car loan each day to fund their new vehicle and this may affect large numbers of home buyers. The report also states that drivers had taken on debt worth £31.9 billion during the last year, an increase of 10% on the previous year.
Experts are warning potential homebuyers that taking on car finance just before buying a home, could harm their chances of securing a mortgage. Aaron Strutt, from Trinity Financial mortgage brokers, said:
“Most people will have no idea that even a modest car loan can have a huge effect on the size of mortgage you can get. If you’ve got two or three cars on finance it can knock tens of thousands of pounds off the offer the lender will make.”
Strutt adds that debts and car loans may even result in being rejected by banks. Other mortgage brokers add that having large amounts of debt can impact on the chances of being accepted by a lender for a mortgage.
In addition to reducing debt prior to applying for a mortgage, seek advice from a mortgage adviser, as they have studied on a CeMAP course and will be able to help you maximise chances of acceptance from a lender.
