Are Mortgage Rates affected by Car Finances?
- Car Finance,
- Sep 13, 2019
The first two most important achievements of adult life are getting a car and a house. It does not matter which order is followed i.e. which thing is acquired first, but nonetheless, if you have both of them at the same time, you might start calling yourself a successful adult. However, it does not count if you immediately get into serious debt and are unable to pay back or pay for other necessary things in your life.
Let’s say you have recently stepped into the adult life and are anxious about getting your own car and your own house, but immediately, you are hit by taxes, medical costs, insurance, and other costs of living and the job you have just barely got you through the day. How are you going to get your very own car or a house with that budget? Well, loans, right? Technically, yes.
Although we would prefer that you work hard and stay away from loans by cutting the unnecessary budgets of your life and saving up enough so you can buy a brand new or a used car and eventually a house, but there are times when loans seem like a considerable option. Recently, a plethora of loan types have been introduced to the market which makes them paying back a really easy job but they come with high costs if you are still unable to pay them.
Some Information about Home Loans and Car Finances:
In any case, you should know a little bit about both home loans and car finances before even considering to get one, or both of them. Car Finances are a really good option if you are a bit short on credit but have a good enough credit score to know that you can pay back for it. There are several types of car loans but the most important ones are secured car loans and unsecured car loans. Low credit car loans are available with the lowest of car loan rates and a minimum interest rate that people can get easily. Home loans are available easily just like car loans but the mortgage rates are relatively greater since the amount of loan you get is also higher.
If you want to learn more about car finances, click here.
Why is there an effect on Mortgage Rates?
Imagine if a friend comes to you and asks for some money and from the kindness of your heart, you give him some. Then after a couple of days, without paying back the previous debt, he comes looking for some more money. Would you pay him again? Maybe, but if he continues doing that over and over again, you will deny him at one point. Now imagine that a complete total stranger does that to you. Would you pay him again the second time? Surely not, he has to pay back the previous debt first, right? That’s how it is with mortgage rates and applications.
Banks, Credit Unions, or other sorts of lenders might deny your mortgage application if you have a bad credit history or you a low credit score. Your dreams of being a successful adult might not be that easily fulfilled if you have already taken a car finance loan and are hoping to get a house too through a mortgage or some other kind of loan, or vice versa where you are already paying the mortgage for your house and apply for a car loan.
How are Mortgage Rates affected?
Now that you might have an idea about the why, let’s move on to ‘how’. It is not that your application might just be denied off, it’s that all the lenders and brokers are connected with each other and they can get every single detail of your life and then decide to give you a car loan, a house loan, or some other type of loan with variable interest rates depending on your lifestyle, your background, your budget, your credit score, your credit history and all the other filters that might apply on you.
Following are some effects that might occur if you still have a car loan debt on you and you apply for a mortgage:
1- Interest Rates & Duration’s Increase: To provide you with some ease, brokers or lenders might give you an extensive time frame to pay off your debt, but that comes with a cost too; they might be leeching money off you using higher interest rates. Be wary of this and keep your eyes open if you want to avoid this. Do not rush on taking a loan despite the higher mortgage rates, instead, wait and save up some money to pay off your other debts before you move on to the house. Besides, crashing with a friend or your parents isn’t as bad as it seems if it is for a small time.
2- Lower Loan Amount: The amount of house loan you might get might be lower than an average person would get. Obviously, they want a guarantee of whether or not you are able to pay this amount back, and with a lower amount, they have a ray of hope… although they don’t believe in that and decide everything by calculations, you get the idea.
3- Denial of Application: Your application might get denied in the worst case. The lenders have several factors to take into account while they analyze and inspect your entire life and decide whether or not you are eligible for the loan, so the companies might make a pattern out of how much and how you spend your money to give them a reason for denial in your application. It’s not a bad thing, though, it gives you a reason to rethink about your budget patterns and see if you can save some money to pay off your previous debts before you get a new one.
How can you save money?
Since you know that your mortgage is being affected by your debts, maybe it’s time to save some money and see what you can do with your life if you do! Let’s dig right into it and find out how you can save your money.
1- Reduce Unnecessary Budgets: Unnecessary budgets can be cut off easily but require a strong dedication and motivation to do so. You do not have to drink that express Latte every day when you can go on for an entire day on a simpler drink or a beverage. Neither do you have to go out every day to eat dinner when you can easily cook some for yourself or order from a not-so-classy restaurant. And you certainly do not have to go for joyrides every night and feel the thrill when you could be home doing something much more important. This is an example of how you can cut the unnecessary budgets from your life and save up money to pay off your car loan or get your mortgage rates back to normal.
2- Change your lifestyle: You should change your lifestyle to a much simpler one as compared to the one you currently have. Gucci, Armani, Starbucks, and other high-class brands should be boycotted for the time being and you should get more down-to-earth with your life to save up some money.
Get what you need, not what you want: This is pretty self-explanatory. You don’t necessarily have to buy something as long as you don’t need it. If there is a use for it, get it, otherwise, discard it.
At the end:
In a nutshell, your mortgage application and mortgage rates or amount might be affected by the current loans you have e.g. a car loan or a personal loan, etc. So, if you want that to not happen so often, you should consider saving up some money and getting things through your savings.
In a case that you buy a house first and now want a car and have got all the necessary things you need to get before buying a car, you should be a bit more precautious and run some car history checks and VIN number checks on the car of your choice before you decide on buying that car, and if you think that’s time-taking, you would think wrong since QuickREVs does that very quickly and easily!