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Spreadsheet Ranger

What effect will financing a vehicle have on my home loan

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Scenario:

I want to to purchase a truck (for a business, that they will pay the monthly payments for) in my name. 

 

12 — 24 months from the date of purchase of the truck I want to apply for a home loan to buy a house. 

 

I currently rent and would like to move into a house of my own, but at the same time I'm in a position to be a part of a business, but for that I will need to finance the truck although the monthly payments for the truck will be paid by the business. 

 

Ideally I would like to buy a house in the next 1 to 2 years, but the truck would probably be financed over 5 years. 

 

My question is, will this have a negative effect on my ability to secure a home loan? 


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I’m not too sure of the circumstances of the truck agreement but I’d be weary about it. It seems as if the business stops payments (because of bankruptcy etc.) it would be your name and credit score that is damaged. You also may not have a claim on the asset if you aren’t one of their creditors so it could get taken away and you’re left with monthly installments to pay.

This could cause you to default on payments and then will obviously fair quite badly when trying to get a home loan.

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Totally understand. That will be considered absolute worst case (I am in a position to cover the monthly installments if that should ever happen and fully understand the ramifications of that situation). 

 

To give some clarity on the workings of this deal, I want to help out a guy who runs a small scale logistical business (for the last 18 years), but the last 4 years he has gotten an increasing amount of work through more larger logistical jobs during which he rents a truck everytime. 

 

He wants to expand that side of the business however the age old "you need money to make money" is very applicable in this situation, unfortunately he cannot get finance for an additional truck, but I am in a position to get the finance. 

 

If I wasn't planning on buying a house and exiting the rental market within the next 24 months I would've financed this truck with my eyes close it's not defaulting that concerns me it's just the effect this might have on my prospects to secure a home loan. 

Edited by Spreadsheet Ranger

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Why would this be any different from having a financed car while applying for a home loan? I stand corrected but it will only be relevant when it comes to the affordability calculation.


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3 minutes ago, Bandit said:

Why would this be any different from having a financed car while applying for a home loan? I stand corrected but it will only be relevant when it comes to the affordability calculation.

 

I don't think it would be any different, but I have a fully paid of car so I've never financed a vehicle and thus I have no idea what the effect on affordability calculation is. (that's what I'm trying to find out and understand) 


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15 hours ago, Spreadsheet Ranger said:

 

I don't think it would be any different, but I have a fully paid of car so I've never financed a vehicle and thus I have no idea what the effect on affordability calculation is. (that's what I'm trying to find out and understand) 

 

Made no difference when I applied for my home loan. You list your monthly costs etc, they check how much disposable income you have left and if enough you get the loan (depending on other factor of course). 

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1 hour ago, Bandit said:

 

Made no difference when I applied for my home loan. You list your monthly costs etc, they check how much disposable income you have left and if enough you get the loan (depending on other factor of course). 


Alright that makes sense.

So that changes my question to the following:
Should the guy pay the installments of the vehicle into my bank account and I pay the vehicle company (is there a tax issue doing this?) or should the guy pay the installment straight into the vehicle company?

Point I am trying to get at is how do I show the bank that the vehicle payments doesn't effect my disposable income?


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I’m not a tax expert, but usually if an amount is received by you that’s not for your own benefit then it’s not included in your gross income and not taxed. There might be other reasons but you should probably speak with a tax consultant.

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