anyone Mortgage to include car.

from my limited experience, I don't think this is possible on a standard first mortgage. However, if you take out a second mortgage, (refinance), or a home equity loan, which all are in essence the same thing, then you can use the money for whatever you want, AND the int. becomes tax deductible. (generally speaking). I've done this. When one of my houses was paid off, I took out a home equity loan, purchased a car, then made my "mortgage payment" and wrote off the interest........

 

The problem with this is that you will be paying on your car FOREVER!! I have lived by the motto that if I can't afford to pay for it in 5 years then I need to reconsider if I really need to own it. You are also betting your house against your car. That is if you default on your car payment the bank will repo your HOUSE....not a good position to be in. But at least you will have transportation to get back and forth to work

You will become your Mortgage Rep's best friend if you do this. There are certain situations where it makes sense (paying off credit cards with 19% interest for example) but you can get a pretty good rate on an auto loan these days and although you will not be able to write off the interest paid you will pay a WHOLE lot less interest over the course of the loan.

 

When you build some equity in the property you can use an equity line. It's a great way to go as you can use the money and pay it back whenever you want and you only need to make the interest payment on the borrowed money. There's also the possibility of writing off the interest expense.

 

buzz, that line of reasoning is correct, because many people over extend themselves. However, if you can afford to pay off the car anytime, or even just make the "2nd mortgage payment" and calculate it so that your car is paid off in 3 -4 years the interest is still tax deductible by doing this way, v.s a standard car loan. It makes a lot of sense for many people. however, you're right, if you're just mortgaging yourself up to your eyeballs in order to by stuff you can't afford, then that's someone else's own stupidity.

 

true true true....when I was selling exotics I would have people come in and use this logic when the bank would not approve their financing. They would tap an equity line and buy the car for "cash". This did not really make sense in their situations.

I also don't like the idea of betting your house against your car. If you get into a situation, either through your fault or outside causes, and you can't afford both your house payment and your car payment any longer at least you can have the bank repo the car and still have a place to take a shower.

When people would come in and see the window sticker on the Lamborghini Diablos they would say something like, "Man, that is as expensive as my house." and I would tell them that you can always live in your car but you can't drive your house to the grocery store...but I didn't really mean it

 

Well to answer your question, yes it is theoretically possible to pay off your auto loan using your house. First you need to buy a house and get approved on a mortgage. Then you need to have enough equity in the home in order to pay off the balance on the car. This second mortgage or home equity line then becomes an additional payment that is sent seperatly from your first mortgage. These are ususally interest only balloon payment 10 year loans that have an adjustable interest rate. Having an adjustable rate means that the payment on this loan will not be the same from month to month. I have an equity line on my house to avoid PMI (private mortgage insurance) and my payment varies EVERY month...sometimes lower when the Fed drops rates and sometimes higher when rates creep up...I will pay off the second before the 10 year balloon comes due, that is the 120th payment is for the full amount of the balance of the loan.

 

Houses appreciate in value in the long term. Generally speaking any house in the US should be worth more if you stay in it for ten or more years. Sometimes the market is hot, like recently, and you can have appreciation in under a year. The housing market is near the top right now, so it is very possible to lose equity in the short term with any property purchased now.

Say you buy a $300,000 home and you put down $50,000. You begin with $50,000 in equity. If the market increases and your house becomes worth $348,000 while you paid $2,000 down on your mortgage, you now have $100,000 in equity. If you pay $300,000 and the market contracts and the home is suddenly worth only $250,000 you would have zero equity.

99% of your equity increase in your home is from appreciation, the other 1% is from mortgage payments. On a 30 year mortgage you do not start paying any significant principle in the first decade. Since homes turn on average of seven years in the US, most sellers equity appreciation is the result home inflation.

 

You could also by a property in distress...ie needs to sell because of a death/divorce/job transfer etc etc etc. You may be able to buy this house for under market value as assessed by a licensed home appraiser. In this situation you move into the house in an equity position.

When I built the house I am in now from the time that we signed the purchase agreement to the time we closed on the new construction there was a $5,000 dollar increase on the builders other comps in the neighborhood...ie we bought at a good time before the builder raised his prices...in this situation I moved in with a $5,000 equity position on the home.

Other than that you have to wait until the property gains in value...but the good thing is that you are putting your money on an appreciating asset and you get the tax deductions that homeowners are entitled to.

Good Luck!

 

A 3, 5, or 7 year ARM has the rate fixed for the first 3, 5, or 7 years respectively. After that period the rates adjust annually or semi-annually (depends on the terms of the loan) and are based on one of several indexes. The margin on the loan will determine what your rate will adjust to at that time. For example, if the margin is 2% and the index rate is 5% then your adjusted rate is 7% (5+2). If the index is at 6% then you are at 8%, and so on. There are "caps" on each ARM limiting the amount of the adjustments to keep you from getting slammed if the market tanks.

Hope that helps.

 

OPM RULES!