Financing in Boston College>Question Details

Trulia Boston, Home Buyer in Boston, MA

Should I refinance to pay off an auto loan?

Asked by Trulia Boston, Boston, MA Thu Nov 1, 2012

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9
Heath Coker’s answer
Should is the key word.
What are the long term plans for your home?
How much are you trying to pay off vs what is your equity?
...
More Info Needed.



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0 votes Thank Flag Link Fri Nov 2, 2012
This is not a new idea, nor a bad idea, people do it everyday. They take out equity in their homes to pay for many things, 2nd homes, boats, cars, college education, make repairs to their home.

As to your individual situation, you as I stated should speak with your accountant. The time value of money is an important concept. That means borrowing money today and paying it off with future money that is not worth as much due to devaluation of the dollar.

Some important questions would be stability of your job, value of your home, equity in your home, stability of your neighborhood.
0 votes Thank Flag Link Fri Nov 2, 2012
The easy answer is of course to say it is not advisable to pay for something for 30 years. But maybe they want a 10 year mortgage where they would lower an existing high rate and save on their overall monthly spending. For some clients, spending less per month is their only goal and will improve their situation- so in some cases it can work. We don't have enough info from what was asked, so they should speak with someone on the financing side who can tell them more before they're told no.
0 votes Thank Flag Link Thu Nov 1, 2012
I run 10-20 short sales at any given time. There are two typesof clients...

The first is the person who bought at the peak and have to sell for various circumstances

The second person is the one who constantly stripped the equity out of there house that may have bought in 1990's, but refinanced and took money out, to buy CARS and otherwise finance a lifestyle. Now they are losing their home. They really should be sitting on quite a bit of equity in their homes.

I am sorry but I think you should only touch the equity in your house if, you ABSOLUTELY need the money for:

You need to use the money to maintain your home (ie-roof, furnace, etc.....)

Dire emergencies.
0 votes Thank Flag Link Thu Nov 1, 2012
Hmm I guess I'll chime in here. I'd say that that are you nuts question made me laugh. As you can see based on the answers here I little more information would be need it to answer this question. For example, how long is left on your mortgage?, if it is a fairly new one, maybe a year or two, you may say that it can make sense but you'd have to run the numbers on the interest added and the 24 months in extra payments vs whatever it is you have on the car loan. You can always ask your CPA for advise on this as they are typically good with numbers. I would personally no refi my house to pay off a fast depreciating asset such as a car (hard enough to build equity on your house these days).
0 votes Thank Flag Link Thu Nov 1, 2012
On the surface it soulds like a bad idea

But actually it is not a bad idea at all.

You are able to write off the interest in your home loan, but not your auto (unless you use your car for business and then its already a write off)

Your payments will be lower, but also for a longer time.

Your home is more likely to appreciate than your car.

I would still ask your accountant.

Like to hear the others thoughts on this.
0 votes Thank Flag Link Thu Nov 1, 2012
ok... I'm sorry I am going to be flat out blunt. Are you nuts?

Why would you refinance an auto loan for 30 years.... That is essentially what you are doing. What ever term loan you are refinancing for is how long it will take you to technically pay off the car. Your car what might last 10 years if your lucky!!

So now you have a vehicle that doesn't run anymore that you are still paying on?
0 votes Thank Flag Link Thu Nov 1, 2012
There is more to answering this than giving you a simple yes/ no. Personally, I would look at your whole credit scenario and discuss with you the goals of where you want to be... and IF refinancing could actually help you achieve those goals. If you would like to discuss things... my contact info is below. No cost or obligation.

Regards,
Scott McCauley
Licensed Mortgage Planner
Regency Mortgage Corp
NMLS #174108
Ph: 603-380-3798
smccauley@regencymtg.com
http://www.LendWithScott.com
0 votes Thank Flag Link Thu Nov 1, 2012
Personally, I dont like taking out a 30 year loan to pay off an asset you have for only several years.

Rates are fairly low right now and if you have not taken advantage of them, perhaps it could make sense. If you dont have a financial planner to bounce a question like this off of, then perhaps it time to find one.
0 votes Thank Flag Link Thu Nov 1, 2012
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