Hi. I would like to buy a new house but I cant really afford it right now. I currently have an auto loan at

Asked by Gary, Cottage Grove, MN Wed Apr 22, 2009

3% which I am going to completely repay by May next year ( 2010). If I refinance my car for 5 years ( at 5% APR), I can redirect the remaining money for mortgage. Is it advisable to redirect my car payments towards mortgage to buy the house right now to take advantage of mortgage rates and house prices? I am not sure how the Market will be by 2010 May as that would be the time I can completely pay off my auto loan if I pay at the current terms.

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Kristina Smi…, Agent, Minneapolis, MN
Fri Oct 22, 2010
Have you considered the possibility of purchasing on a contract for deed? This would let you opt out of getting a mortgage with a bank, and lets the sellers act as the bank for you. Its a pretty nice option because you can negotiate how much you want to put as a down payment and then the monthly principle and interest gets paid to the sellers over something like a five year time frame, with a final lump sum to be paid at the end. It is another option to consider if you are having difficulties with financing! If you have any questions or need help, I offer a free service for my buyer clients! : )
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Gina Schedivy, Agent, Eden Prairie, MN
Wed Mar 24, 2010
Gary. I hope you followed the advise of the agents who responded to your question last year. By now, you are two months away from paying off your car loan. If your credit rating is higher than 620, you might be able to qualify for a loan with very little money down on a house. I have even heard of a Minnesota bank offering up to $5000 grant, but you have to be buying your very first home and buying it in a metro area in Hennepin County. Your household income also has to be below $67,200. Let me know if you fit this criteria. I would be happy to help you buy a new home and apply for the grant.

Gina Schedivy
Re/Max Results
Plymouth, Minnesota
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John Tittle, , Minnesota
Thu Apr 23, 2009

I would find a way to get the house without refinancing the car. Otherwise I would wait to buy the house. The fact that your finances are so tight should be a signal to be careful.
That said, in some counties outside of the metro there is zero downpayment financing available. These loans are called rural development loans. They are available in Goodhue County for example. A good loan officer should know about this.
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Steven Abrah…, Agent, LAGUNA BEACH, CA
Wed Apr 22, 2009
Gary, my father used to say "you cannot borrow yourself Rich"!
I have lived by this and it has served me extremely well!
I would rather be the turtle than the rabbit in the debt department.
Keep your car loan @ 3%, especially because of the fact I am finding CDs at 3.4% (+).
If you can, why not make the spread.
But, you must be careful. You must have discipline!
Having said this, if you cannot find a CD paying 3% (+), your car is a depreciating asset!
Pay it off as quickly as you can!
I would have you consider not purchasing a home until you are debt free and even then you should be able to put down 25% (+) on your home purchase.
A home is a wonderful possession, but it can be costly!
In my opinion, I feel the market as a whole has not bottomed out, mainly because fundamentally nothing has changed.
Real estate is local in nature; there are no absolutes except location, location, and location.
When you can afford it and you have cash reserves there will always be a good buy!
Bottom line: Everyone's situation is different, but one thing holds true, "it is better to earn interest than it is to pay interest"! Live within your means and will be happy, even during the hard times!
"I would rather my money work for me than me work for my money"!
p.s. Above is not given as financial advice. I am not a certified financial planner. I am an Estate Realtor of 24 years. I personally am happy not owning any publicly traded stock and feel the best place for cash is in an FDIC bank account. Also, I feel that Gold bullion, not gold stock, might be a decent hedge for what may be coming! Never buy gold unless you can personally or have someone to hold it (that you personally know).
Disclaimer: Everything I have stated is of a personal opinion and again is not offering any financial advice.
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Susan Hoffla…, Agent, Shoreview, MN
Wed Apr 22, 2009
Gary, first of all, you are the only one who can decide if the advantages out weigh the disadvantages. There are lots of reasons to buy this year instead of waiting. It's more the known vs. the unknown. First of all, mortgage interest rates are great right now. No way to know where they will be by next year at this time. Next, prices are still good, but as the previous writer indicated, there is some change going on right now. We have word that another round of foreclosures is hitting the market in a few months which will put more properties on the market again. But, perhaps by next spring, that inventory will have dwindled as well. Finally, that $8000 tax credit, which is an actual credit. Meaning, if you owe money, the $8000 will be credited toward what you owe and you will receive the remaining amount in a check! If you don't owe, you'll be receiving the $8000 in addition to what you will be receiving as a refund. Would you be able to come up with a down payment and make the monthly payments on a house and the car until you get the refund and can pay off your car? The most important person to talk to about your situation to determine what's best for you is a reliable mortgage person. Let me know if you'd like some recommendations. I have a few select people that would be happy to advise you with no obligation or fee. E mail me from my profile.
Web Reference:  http://www.homestosellmn.com
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Jackie Funk, Agent, Minneapolis, MN
Wed Apr 22, 2009
Gary: Are you by chance a first time home buyer (or haven't owned a home for three years or more)? If the answer is yes, there is a tax credit of $8k if you purchase by December 1, 2009. An individual can amend their taxes and receive the credit earlier (check with an account to see how this works) and perhaps that can be used to pay your car off? 5% apr seems pretty high to refinance a car, but I don't know about cars, my specialty is homes. Good luck to you - it would be nice if you can buy this year since the traditional RE market is starting to rebound already.
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