Published 26 July 2024 · Last reviewed 30 July 2024
Image by thepassenger from Pixabay
According to the RAC, there are now over one million electric cars in the UK, but with an average cost of around £50,000 to purchase them, the help of a Remortgage to buy an electric car may be a preferred option.
That’s right; an electric car can be a massive outlay, and if you have committed as a family “to go green,” this could mean upgrading the whole household’s vehicles, not just your own. And, of course, putting in the all-important electric charger point, which can be around a thousand pounds on top.
Such an outlay can reduce the finance level of traditional personal car loans sourced from your local high street building society, so in this article, we explore the possibility of remortgaging to buy an electric car.
How do I qualify for a Remortgage to buy an electric car
1) Equity
The viability of remortgaging to buy an electric car is down to the “equity” to you in the home and the maximum mortgage level. What ” equity ” means is the difference between any finance currently secured against the property (typically a mortgage used to buy the property) and the current value of the property appraised by the Mortgage Lender’s Valuer.
For example – you have a home worth £400,000. It has an existing mortgage of £250,000. So, the property has an equity of £150,000. However, no Mortgage Lender will allow you to remortgage to the whole mortgage value, i.e., give you a 100% remortgage; the best you will get is 95%. £400,000 * 95% = £380,000. £380,000 less £250,000 existing mortgage, means you are releasing £130,000 towards your electric cars.
2) Remortgage Affordability for an electric car remortgage
The initial assessment will not take long, but I strongly recommend you work this through with a professional Mortgage Broker such as Niche Advice; otherwise, you may miss out on a particular calculation offered by a certain Mortgage Lender. As a rough guide, normally, you are limited to around four to five-and-a-half times your annual salary as a maximum mortgage.
3) Other considerations
- The Mortgage Lender will look to see if the amount being borrowed is around that of an electric car purchase and not a disguise for raising money for another purpose and may seek evidence.
- The Mortgage Lender may also consider borrowing money for other purposes at the same time.
- Are you currently in an early repayment charge period, and if so, can you wait?
- Do you have a current mortgage? Some Mortgage Lenders do not lend on mortgage-free properties, otherwise known as unencumbered.
- In addition to loan-to-value restrictions, some Mortgage Lenders might have a secondary rule limiting the actual amount of additional borrowing to a monetary sum such as £50,000.
- If you have already purchased the electric car and are looking to “debt consolidate” the hire purchase, personal contract purchases (PCP), or loans, again, a remortgage might be a solution. However, often, mortgage lenders want the mortgage to be paid on a capital repayment basis.
- There are Mortgage Lenders who will consider poor credit profiles, but normally, you are looking at a maximum loan-to-value of 85%.
- You should also consider other forms of finance, such as personal loans, second-charge secured loans, and hire purchases.
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