Would it be dumb to refinance to buy a new car or is car loan better? (interest rate, credit)

[vpcats]

Originally Posted by chet everett

I will add that I would probably ALSO run the numbers on a HELOC -- that is ALSO tax deductible, and can be done at the same time you work on a refi, but I have found that generally a STRAIGHT refi (for just the amount you owe) coupled with a HELOC is a smarter way to make sure that you do not get into any trouble. While I fully agree that VB's strategy of accelerating the payback on a mortgage as though it were a simple car loan is sound, I have seen TOO MANY people NOT stick to that, and then end up with their car costing them way too much in interest.

The HELOC will have LOWER intrest than the mortgage, BUT will need to be paid back FASTER, which is a generally a good thing.

SO my suggestions:

#1 -- Investigate a ZERO PERCENTAGE or very low auto loan.

#2 -- refi your existing mortgage amount to take adavantage of low rates

#3 -- if you need cash for home repairs and /or a car purchase get a HELOC

I have a HELOC which I got when I bought the house (6 yrs ago) and is untouched, but it's there for true emergencies. It could cover the cost of a new car. I don't know that I could deal with the changing rates on HELOCS though over the long term. The cap is pretty high and you never know how much the rate will fluctuate. But it's an idea I had not thought about. I like the fact that the interest would be deductible.

I think my current mortgage's rate is pretty good (5.625) and I wouldn't be gaining even a whole percentage point on refinancing but I'd have to pay the closing costs (was told about $2900).

Is it true that I'm better off staying with my current lender if I refinance? Is there any obvious advantage?


P.S. I'll call to check on current HELOC rates.

[MotleyCrew]

Originally Posted by vpcats

I have a fixed 30 yr. mortgage @ 5.625%. I have about 23 yrs. to pay on it but I always pay a little more hoping to finish sooner.
My car is 10 yrs. old and in extremely good shape but I may have to hand it down and have to get another one for myself.

I called my current lender today just to get ideas. I have no clue what he was talking about and he was very, very fast with his explanations.

I would like $25K after all is said and done (I'm not looking for a luxury car but a dependable one). Depending on 30 or 20 yrs, my monthly payments would increase from $60 to about $300 more/mth. I'd go for the 30 yr and amortize for 25 or 20 but with 30 I have flexibility. Taxes and HOI are separate of course.

There would be approximately $2900 closing costs. My rate would be probably about 4.7% with a plus/minus APR of 4.99%?????

Is it really stupid to refinance or am I better off with a normal car loan? Monthly payments would probably run $350 - $400 depending on 48 or 60 mths. I'm a little bit afraid of that since we never know what HOI could go up to in Florida if there is another hurricane, or if I ever lose my job. I haven't had car payments for a few years now and it kills me to think of having them again.

BTW...my lender was Countrywide, now B of A. The loan officer was saying that I'm better off staying with them (cause I said I wanted to shop around) because my closing costs etc would be lower and I wouldn't need reserves. Is that true?

Thanks for any suggestions!

I like Dave Ramsey and would suggest what he would suggest. If your car is in good shape, keep it and save enough cash to pay for a new one when you need it. I would never, ever take a second out on my home. This has always been our motto and we now have two homes free and clear. Car loans will benifit the dealer not your pocket.

[vpcats]

Originally Posted by MotleyCrew

I like Dave Ramsey and would suggest what he would suggest. If your car is in good shape, keep it and save enough cash to pay for a new one when you need it. I would never, ever take a second out on my home. This has always been our motto and we now have two homes free and clear. Car loans will benifit the dealer not your pocket.

Yeah well, my car is already 10 years old and extremely well maintained but it's also cost me to keep it like that. Like I mentioned earlier, I may have to hand it down and have no choice but to get another one.

If I needed a new roof on the house, should I have also been saving for that?

I live in Miami. Things are expensive here. Homeowners insurance is VERY expensive and I also have to pay someone else everytime the house sneezes. I can't fix the roof myself, or the water heater, or the septic tank, etc.

I do like to have a life also.

I'm not blank blank but I have to be realistic.

P.S.. Who is Dave Ramsey?

[chet everett]

Though it is not as easy to do these days, as so many independent mortgage brokers have left the business, there are still quite a few different "outlets" for HELOCs, refi and "straight" home equity loans. Personally I used to LIKE the fixed rates on straight home equity loans, but lenders are not offering the nice low rates on those like the once did.

Really there is no reason for your current lender to be cheaper than any other lender, unless they want to 'reward' you with the fact they are spending no marketing to capture you... Any refi still needs an appriasal, a trip through title land / courts, some time for underwriters to dot i's and cross t's...

The better your credit score the more 'hungry' a lender MIGHT be to keep you in the fold, but they are not going to be eager to save more than a few fractions of point just becuase you are an existing borrower.

Do the calculations to determine what the costs will be and how long it is until you are "money ahead" with EVERY change in rates / change in terms. Not hard at with calculators all over the web, I think even City-Data has some decent ones...

Originally Posted by vpcats

I have a HELOC which I got when I bought the house (6 yrs ago) and is untouched, but it's there for true emergencies. It could cover the cost of a new car. I don't know that I could deal with the changing rates on HELOCS though over the long term. The cap is pretty high and you never know how much the rate will fluctuate. But it's an idea I had not thought about. I like the fact that the interest would be deductible.

I think my current mortgage's rate is pretty good (5.625) and I wouldn't be gaining even a whole percentage point on refinancing but I'd have to pay the closing costs (was told about $2900).

Is it true that I'm better off staying with my current lender if I refinance? Is there any obvious advantage?


P.S. I'll call to check on current HELOC rates.

[formercalifornian]

I know lots of people who have done this, but it never seemed like a good idea to me. The sooner I paid off my house, the better, so adding more debt to the note had little appeal.

[Donn2390]

Nobody ever got rich buying a new car. You can get a great used car for $3 or 4 K. Of course going that route, the only person you will impress is yourself...
The pain of the payments will outlast the thrill of the new car. The new car joy only lasts a few months, the payments last for years...

[vpcats]

Originally Posted by Donn2390

Nobody ever got rich buying a new car. You can get a great used car for $3 or 4 K. Of course going that route, the only person you will impress is yourself...
The pain of the payments will outlast the thrill of the new car. The new car joy only lasts a few months, the payments last for years...

LOLLLLLLL. Tell me about it but I tend to keep cars for a long time. Much longer than I keep anything else. New is reliable. At least it's under warranty for a while. The one I have now is just about 10 yrs old and that one is worth more than 3 or 4K. It only has 87K miles on the first go around.

[maggiekate]

Originally Posted by Poltracker

It's not really stupid, it is incredibly stupid. You would be financing the cost of a vehicle who's value would decline right off the floor and keep declining for a period of 30 years. If you get a car loan, you are only financing that for 3-4 years. The difference in interest you would end up paying is humongous (no I'm not going to calculate it) and would probably end up equalling the cost of another new car in the long run. That was exagerating a bit, but it is a significant amount to pay for a depreciating item. Get a regular car loan. Next time when you have paid off the car, keep making payments into a savings account, roll it into CDs or some other investment tool and you will be able to pay cash for the next car, possibly with some change left over. Worked for me. Another alternative is to keep the old car and get that savings account going or buy a good used car. 10 years isn't that bad as long as it runs and if you can keep it going for 3-4 more years while saving, you will have the cash.

I gave you a rep! when young and at home, I always did save, and trade the car in around 5 years! Not now, I try to follow the book and take care of my car.
This car will soon be 8. It is all paid for, and I did do a cd to save, but do not see any need to go buy? My mission is pay off the house, next year.

[maggiekate]

Originally Posted by vpcats

Thanks for your perspective. It would have been nice to be able to save like if I still had a loan payment so that I'd have the cash now. Unfortunately, I wasn't planning on my HOI going to $3800, then $5700, then $6500/yr. Now it's back to $2400 and change.

Sometimes things come up.... like right now I have to get a roofer because all of a sudden it's raining inside my foyer from yesterday's rainstorms.

Get the idea? So...a monthly car payment is scary because I need some play money for emergencies, which do happen.

If I could keep my car, I would. I won't buy used. I'm not going to inherit somebody else's headaches.

I do understand the depreciating factor and it scares me but it may be the only choice.

The best car to buy is a certified 2 or 3 year old used, which comes with all the new car will! Honda gets my vote and the civic.
also insurance will be cheaper. My 2002 crv will be 8 years young, and it is
a great car for my needs. I treat the car well, and it goes to the dealer, sooner, than maybe needed. It does have real low miles 20,000. Next may be some tires, which beats the car payments. The battery did last til the car was age 6.

[Poltracker]

Originally Posted by maggiekate

I gave you a rep! when young and at home, I always did save, and trade the car in around 5 years! Not now, I try to follow the book and take care of my car.
This car will soon be 8. It is all paid for, and I did do a cd to save, but do not see any need to go buy? My mission is pay off the house, next year.

You go girl! I paid cash for my last car and kept the previous car (13 yo) which I now have fixed up as a back-up vehicle. Keep that CD rolling and it will only earn money. You will quickly learn that when you are willing to pay cash, the dealers will give you a really good deal. I'm on the 5 year plan for the house...still 4 to go. It is very freeing not to have any debt or very little debt.