Question by Alecia C: Is it wise to refinance your home mortgage to consolidate auto loans?
My gut answer to this is no. I tend to think that a refi on my home mortgage for 30 years to consolidate a 4 -5 year auto loan only extends my payments and in another 5 years or so I will have to get another auto. Would a 2nd mtg or line of credit for the auto loan be wiser?
Answer by KL
It depends on the term and rate. The benefit is you turn the debt into a tax right-off, but unless your lowering the rate, there’s no other benefit. Auto loans usually have pretty short terms, so it’s better to stay with them.
Add your own answer in the comments!
Cars depreciate in value – if you owe more than you can comfortably pay – sell it and get a cheaper car, preferrably one you can pay cash for.
Best case is to never finance cars, and buy good, dependable used vehicles.
When you add a car to your mortgage that means you will be paying for the car for 30 years. SO, do you want to pay for the car for 30 years? But if you don’t plan on staying in your home and it has appreciated and you need a new car you could refinance and buy a car then make one payment for the next few years until you sell the house. If the house appreciated enough you then have a car paid for from the appreciation on your house.
SO, I guess we would need more info into your situation to give a informed answer.
Well, it simply depends on 2 factors:
1- the difference between the rate of refinancing and the average rate of your auto loans
2- your ability to make the payments of the new loan.
Don’t get fooled by promising sales lines you only pay ### (for life) and the likes. Compare simple annual fixed rates, no fancies, no options. One way people deceive consumers is by comparing apple and oranges. So make sure you’re not sold a lemon!
Second, if your financial situation is tight, it maybe better NOT to mortgage your house and risking to be thrown out!
The best is cut out (at least momentarily) what you do not NEED to survive: do you need the car? do you need cable? do you need a phone? a cell phone?
Make your bugdet based on what you CAN spend, NOT on what you WANT to spend.
Paying interest, any interest is never good.
You would never finance a car for 15-30 years.
I think your gut is calling this right. Unless you think you’re going to get a better rate on the refi, I’d keep the 30 yr and continue to pay down the auto loan. Sure, you don’t get the tax writeoff on the interest, but that’s not everything. A HELOC is not exactly cheap, either, and, in the event you default on an auto loan, you just lose the car. Default on a home loan, bye-bye house, but at least you have the car to sleep in.
You said you need to buy another car in 5 yrs? To replace the one you’re making payments on right now or as an additional vehicle? Because I’d think, if you take good care of your car now, you could make it run long enough to not have to borrow to buy in 5 yrs. Besides, having two years of not having to make car payments is a nice break to have.
First and foremost… Never trust advice from someone who isnt a professional, or a licensed mortgage banker…
There are things to consider before determining whehter or not it is a good idea…
when someone says that you take a car and spread it over 30 years, it makes no sense… For instance, if you owe $ 10k on your car, and you roll it into a mortgage, how long will it take you to pay off the $ 10k????
It sure wont take you 30 years!!!
You will most likely pay it off in 7 years or less…
People get the idea that because a mortgage is 30 years then it is going to take the full 30 years to pay off the debt… its ridiculous… If you have a mortagge of $ 100k, and add a $ 10k car loan, and in 30 years you pay off the entire $ 110k, how did it take you 30 years to pay off the $ 10k car????
I hope that makes a little more sense, because its ont of the most common misperceptions in the mortgage industry…
Now, the things you need to take in to account is why would you wnat to pay off the car????
Is the payment to high for you to afford right now????
If that is the case, then it only makes ssense to pay offf the car into a 30 year mortgage in order to bring your payments down…
If you arent worried about the payments, then what is the interest rate on the car loan?
If it is over 7%, then it may make sense as well to roll it into your mortgage…
The main thing to realixze is that a doing a refinance is simply using “equity” in your home to your benefit..
You have earned this equity… You chose this house as an investment, and between paying payments, and an appreciatinig value, you have earned money in this house (equity)(
So, if by refinancing, it can lower your payments/rate, and allow you to live more comfortably… then it absolutely makes sense to refinance the auto loan into the mortgae…
The main thing people do wrong when tryin gto get advice about a mortgage is ask friends family, and even worse strangers that have no experience other then what is best for “THEIR SITUATION”
What i mean by that is EVERYONE IN AMERICA IS IN A DIFFERENT SITUATION FINANCIALLY, EMPLOYMENT WISE, CREDIT WISE, ETC…
We all have different situations, therefore something that maikes sense for one person, may make NO SENSE for another… Also somethingt hat is the best idea for you, may be the absolute worst idea for someone else…
Just because one person found a benefit in doins a specific type of mortgage loan, it doesnt mean that that same program will be right for you…
WHat you need to do is have a LICENSED professional look at your finances, and credit and give you accurate advice on whats best for you..
From there you can then make a more informed and educated decision on what is the best idea, and mortgage option for you…
I work with Providential Bancorp, we are a Mortgae lender serving most of the US…
I would be happy to give you more advice..
Feel free to call or email me at any time!
Licensed Mortgage Banker