Looking to get a property (first one) next year and wanting to decide if I should get that first or a car
The interest rates on cars are stupidly low at the moment eg for a 50k Audi I'll end up paying $5k in interest over four years.
However, how much will having a car loan like this affect a mortgage application?
Edit. The tribe has spoken. No car loan first. Thanks!
The answer is not straight forward, it comes down to how much that and all other commitments/expenses you have / planned for impacts the ability to service your mortgage.
Banks are also not calculating based on today's interest rates, they are required to factor in a couple more percentages when calculating interest payments and hence your ability to service a mortgage.
I would avoid getting an Audi. Very expensive servicing and maintenance and generally not very reliable. Source : Q5 owner.
Don't get it serviced at Audi. Take it to a independent VW specialist.
That being said I wouldn't get a $50k Audi.
Getting it serviced at the dealership
Terrible idea.
Stealerships need to make a 'crust' to pay for those free coffees and sharp dressed sales people who ignore you when you enter the sales room.
Definitely get the property first before your car. Then as long as you can manage your repayments the banks won't car much about your financial situation. (Although I would still strongly advise against getting a loan on a Audi.)
Definitely get the mortgage first. The car loan will affect the mortgage. Also, generally you will get better rates on a car loan if you have a mortgage.
Short answer, Your Mortgage amount will depend upon your liabilities.
Getting a 50k Audi in your example scenario means you want to live in your Audi as your first home.
Banks will see this as a significant liability and reduce your borrowing power.
Banks will see this as a significant liability and reduce your borrowing power.
That depends - it's not going to make much of a difference if OP is on the average $300K that every OzB member is on.
average $300K that every OzB member is on
Average annual salary of $300K ?? OMG i can only dream of that
Don't feel bad - It's just what everyone seems to claim whenever there's a "salary survey" type of post! 🤣
If on $300K probably don't need a loan as take it from 'petty cash' in their pocket.
Also get the house loan first, then a loan for everything else.
This is the dumbest thing I've read in 2021
Savage.
You must not get out much
Well you're half right.
MS Paint is on Ozbargain full time.
But MS Paint does have a point
However, how much will having a car loan like this affect a mortgage application?
Let see, a $500pm repayment on a five year car loan at 0% interest lets you borrow 30k. On a 30 year mortgage at 0% interest lets you borrow 180k.
Because of the loan term, you borrowing 50k for a car, reduces your mortgage borrowing power by a few multiple of 50k.
use CBA's mortgage borrowing capacity calculator and key in the variables:
- income
- expenses
- existing debt (scenario 1: no car loan, scenario 2: with car loan)
you will see the numbers yourself. pretty much consistent with the 50k car loan reduces borrowing capacity by 150k to 200k
i'm assuming this is your first home purchase. 2nd home purchase is much more complex to DIY the calculations.
My in-laws had $6000 left on their car loan. The bank would give them about $100K less because of that. They paid the car loan to get the extra amount on the home loan.
Do you have any liquid assets that you borrow against that isn't connected with legacy finance?
Damn $5k in interest for a piece of crap car.
It's not looked on very fondly taking on a loan to purchase a rapidly depreciating asset.
Friends don't let friends take out car loans.
Buy a car you can afford with cash.
If you get the choice, get the car loan after the mortgage
BUT
I had a 20k car loan when I got my mortgage and they didn't "penalise" me a huge amount re: borrowing power
$50k for a new car prior to purchasing property? Wow. Car money is dead money. Buy an OzBargain certified Camry if your ego can handle driving a sub-$20k car.
I never understood this whole “I have no house/apartment of my own but I must buy a $50k car” mindset.
Yes, it will impact your borrowing capacity because lenders will ask you to declare your outgoings when applying for a loan.
it all depends on what else is on your expenditure lists. Are you earning enough that you can cover a mortgage and a car loan? Then fine. Are you cutting it close and feeling like you may need to justify to the bank that you can “make it work”? Not fine.
All banks give a shit about is whether or not they can rely on you to easily pay back the loan
Get the mortgage … add extra for purchase of car
I was about to say the same thing.
Pay your mortgage payments equal to the mortgage repayments and car repayments, and pay them each pay day be it weekly, fortnightly or monthly.
If you have a partner have them do the same.
Some extra $$$ makes a huge difference over the term of the loan.
A lot.
Typically it will reduce your borrowing power by 3 times what you have owing.
Eg. A $50k car loan will reduce your mortgage serviceability amount by $150k.
I’d recommend against a substantial car loan.