Buy a house? Then maybe better get out the lease car

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Buy a house? Then maybe better get out the lease car

Private car leasing is booming, but for aspiring home buyers it can be an obstacle on the way to their dream. Private lease takes a big bite out of the maximum achievable mortgage. And that bite is also considerably larger due to new rules from April. The borrowing restriction can be solved by transferring or buying off the lease contract. It is better to think carefully about the housing requirements before concluding the contract.

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With a private lease, a consumer pays a fixed amount every month for the use of a car. That includes all costs, except for fuel and parking. Because such a contract entails a significant financial obligation, private lease affects the maximum mortgage amount. Banks also deal with other debts, such as student debt or a loan. According to mortgage advisor Van Bruggen Adviesgroep, someone with an annual income of 80,000 euros who pays 500 euros for the car every month can get about 90,000 euros less in a mortgage loan.

The number of consumers with private leases has almost quadrupled since 2016, to 215,000 at the end of 2020. As a result, advisors in the mortgage sector encounter the phenomenon more often, says Martin Hagedoorn of CMIS Franchise, the company behind De Hypotheekshop, among others. He estimates that 10 to 15 percent of people who apply for a mortgage loan have a private lease contract.

Significant increase

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Hagedoorn: “It used to be an exception, but in the past year most advisors saw a significant increase in customers with private lease. It is not a problem for some of them, but customers with approximately an average income have so little borrowing capacity left that they cannot buy anything during this time. What is striking is that many people have no idea that this obligation affects the borrowing capacity.”

It is often families of thirty-somethings who lease a second car, who unexpectedly run into this problem. Another example is people who decided to lease after a divorce because their own car went to their ex-partner.

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If it turns out during a mortgage application that the private lease contract is an obstacle, this does not mean that people have to give up their dream home. One solution is to buy off the lease contract and return the car.

It is more difficult to get rid of a private lease than a personal loan taken out to buy a car, says Oscar Noorlag of Van Bruggen Adviesgroep. “For consumers who have savings or investments, it can sometimes be a solution to repay that loan or take out a lower loan. With a private lease contract, this is much more difficult because often a high lump sum has to be paid.”

Also read: Is it better to lease, share or buy? Driving as a financial puzzle

How high the costs are mainly depends on the term of the lease contract. The monthly amount is lower for a long term than for a short term. If the consumer wants to terminate such a long-term contract earlier, the difference must be repaid, says Gert Duits of the Keurmerk Private Lease. “Then you pay a termination fee.”

Someone who has received a discount of 150 euros per month for two years because a term of five instead of two years was agreed, must repay the difference in the event of cancellation. That equates to 24 times that 150 euros, for a total of 3,600 euros. Then the consumer is off the contract and the maximum mortgage that matches the income can still be taken out.

Transfer contract

If surrender is not an option, transfer of contract and car is another solution. There are platforms on the internet where it is possible to offer a car with a private lease for takeover. German: “Just like you can sell a car. This does mean that the creditworthiness of the new party must be tested. If you agree with the leasing company that the other party will ‘ride’ the contract, that is an escape route.”

If the other person is a family or friend, it is even possible to reverse the transfer after purchasing the house and to use the car again. “Of course, that is not without risk,” German warns. “It is not certain that you can take back the contract. You have to take another test, and the amount of the mortgage may no longer leave room for a private lease contract. If you can only just afford the house, you have to ask yourself whether this is wise.”

The consumer should actually think about this before concluding the private lease contract. If you are looking for a larger house on Funda or are considering changing jobs, it is better not to lease a car. “Make a financial plan, choose a period that you can oversee and look at the total picture for both your mobility and housing needs,” advises German.

Some leasing companies offer the option to pay part of the lease costs in advance. At the start, the customer can then make a maximum of half of the monthly payments at once, for example with savings or from the proceeds of the sale of the old car. Credit bureau BKR takes into account the amount already paid. As a result, the bite that private lease takes from the maximum mortgage is lower.

As of April 1, the rules for private lease will change. The BKR will count private lease for 100 percent, where it is now 65 percent. As a result, the mortgage can be tens of thousands of euros lower.

Mortgage advisers foresee an increase in financing problems. Hagedoorn, of CMIS Franchise: “We expect more customers to get into trouble, even though they didn’t realize this beforehand. There should be more information about this.”

Buy a house? Then maybe better get out the lease car
Source link Buy a house? Then maybe better get out the lease car

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