Personal Finance

Is leasing a vehicle bad before getting a mortgage?

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  • Sep 15th, 2013 3:30 pm
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Sr. Member
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Feb 12, 2013
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Is leasing a vehicle bad before getting a mortgage?

Have read varying reports that it's factored into my debt to income ratio! In the need for a vehicle soon and may just buy a used one instead. Mortgage is about a year away. Does leasing affect my credit score in any way?
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Deal Expert
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Aug 18, 2005
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Burlington-Hamilton
IMO, leasing a vehicle is a bad life and financial decision in general regardless of whether you have a mortgage.
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Feb 15, 2008
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It certainly places pressure on your ratios. But I've never heard of a lender deciding arbitrarily that they're not going to lend to someone who has a car lease. I suppose there are lenders out there like that, ie: they throw an application in the garbage if they see, "BMW Credit" on the credit file, but they're probably few and far between.
IMO, leasing a vehicle is a bad life and financial decision in general regardless of whether you have a mortgage.
I disagree with this generalization, there are reasons why someone might want to lease, ie: if they can obtain the lease for less than their incremental cost of capital. That's not to say that someone needs to lease an expensive brand new vehicle though.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Fanatic
Mar 24, 2008
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Toronto
Mark77 wrote: I disagree with this generalization, there are reasons why someone might want to lease, ie: if they can obtain the lease for less than their incremental cost of capital. That's not to say that someone needs to lease an expensive brand new vehicle though.
And how many cars have you leased in your life that were less than their incremental cost of capital?
Deal Addict
Aug 14, 2007
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Waterloo
I would never lease but I can understand why some people do, never need to worry about warranty, always have a new car, can swap to a completely different car. I hate renting anything, I like owning things so I would never do a lease.
Deal Addict
Apr 4, 2013
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At the onset of the lease your credit score will decrease somewhat. There is a risk with having take out new debt and the debt-service ratio on the lease will be high. A year later though your credit score should be back to normal as you will have reduced the balance somewhat and will have made regular payments.

A new debt with a monthly payment will affect the amount of mortgage that you will qualify for. A monthly payment of about $500 is equivalent to about a $100,000 @3.59% for 25 years. The payment will be used to determine your debt servicing and it may mean that you will qualify for a smaller mortgage than you were hoping. To maximize your mortgage you should have no other debt and look at term of 5-year fixed or greater.
Deal Guru
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Oct 24, 2012
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Montreal
Don't lease or finance a car if you can wait it out until you get a mortgage.
Those things place a lot of stress on the ratios for qualifying for a mortgage.
However, once you do have a mortgage, you can go get a lease/car loan easily because they aren't as strict for qualification and they will see your REAL mortgage payments on the credit bureau.

Just to put things into perspective for you guys, a conservative 300$/month lease will reduce your mortgage maximum qualification amount by about 50,000$
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Feb 15, 2008
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ksgill wrote: And how many cars have you leased in your life that were less than their incremental cost of capital?
Well if you can get a car lease a 5-6%, and you have a business that's earning 10-15% return on equity -- it makes far more sense to lease a vehicle, than it does to remove equity from a business.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...

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