"Creative" Finacing of an EXOTIC!

Here in Connecticut, they tax used cars on a Blue book value. They ignore what the bill of sale states. That said my Mondial had no listing, so they went with Bill of sale.

 

Like anything else, you just have to be careful. It does help to be friendly with the seller. Whatever it takes.

 

careful with home equity lines.

I think it's a tax free interest only if you use the cash for home improvement.

I know that many people got away with using it for other purposes, but it doesn't make it legal with IRS.

But don't take my word for it - i am not a tax professional.

 

You are right, and I think he'll be OK. But we need to know how long the loan is for and if the CD's duration is required to match.

Total life interest expense on a $100K loan @ 5.25% for 360 months is $98,793

Total life interest earned on $100K CD @ 4.25% for 360 months compounded monthly is $257,064

If he plans on paying on this loan for 30 years and tying up his CD for the same period, you are hurting yourself with the loss of liquidity (...Major service, etc.).

 

Mind telling us what your local bank is, Kerry?

THANKS FOR THE POST

 

I'm no tax pro either, but I believe that the rules changed recently. Now, the interest is deductible regardless of the use of proceeds but only on the first $1 million of principal on all mortgages. No deduction on any excess, again regardless of the use of proceeds.

Someone on this board should be able to confirm or refute this.

 

In most cases, you can deduct all of your home mortgage interest. Whether you can deduct all of it depends on the date you took out the mortgage, the amount of the mortgage, and your use of its proceeds.

If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.) The three categories are:

1) Mortgages you took out on or before October 13, 1987 (called grandfathered debt).

2) Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2003 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

3) Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2002 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).

The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home.


Limits on deduction. You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed above. If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct.

 

Thats a margin loan, not necessarily creative but congrats anyway. Find a way to make the feds pay for it -- that would be creative!

In Nevada new law Jan 1, 2006, there is NO sales tax on car purchases from a private party! Damn I love Nevada, just keeps getting better.

 

I'm moving to NEVADA!!!! Buy a car every other year and that adds up!
The weather ain't too bad there either!

 

Sounds alot better than getting life insurance and cashing in your policy. Leave your family with nothing and have a nice wad of cash to play with. It's possible, but you'd have to be pretty desperate.

 

I have lots of CDs but I have converted them into MP3s, much more convenient.

 

Nevada is a great state:

No income tax

State sanction legal racing events on public hiways
http://www.silverstateclassic.com
http://www.racer.net/nasareno (old Virginia City Hillclimb page, event still continues)
http://www.openroadracing.com/html/pony_express.html
http://www.openroadracing.com/html/gamblers_run.html
http://www.openroadracing.com/html/bonneville_100.html

Close to California (Reno/San Francisco and Las Vegas/L.A.)

Great weather (today it was 65, above normal). only 7" rain/year

Awesome driving roads in the Sierras/Lake Tahoe

As stated NO sales tax on vehicles purchased through private party

12 points per year allowance on your license! (CA is only 4).

 

Hey Guys!

I'm in the mortgage business, and would look very favorably on getting loand done for ya'll so you can buy Ferrari's.... there are lots of "exotic" ARM's that you can do, which minimize interest, maximize cash and alow your home to be your own personal bank... you need all the standard stuff good credit etc... but you can do a $1million plus loan and have a monthly payment less than $3k/month.... yep its interest only etc.... but its the way to go if you want to keep your money and use someone elses cash.... kinda like a commercial deal...

If you are interested drop me a pvt message! love to help... if I can't I'm sure I can get you intouch with a bank that will do a cross colateralized deal... CD, Stocks, etc... but you dont get cash and also get the pleasure of using the pledge too... that is held by the bank!

Tom

 

How in the world does THAT make it such a great deal?

 

Its a great deal for the underwriter

 

Well, they can keep that deal.

 

I don't understand... if you have to borrow, you either dont have the money or you want to use your money elsewhere.... so Interest only deals are a GREAT DEAL... if you want to gain equity in your home... then do a strait amortizing deal, but you will not be able to tap into that money untill it grows thru either equity or appreciaton... an interest only deal lets you use your money now, live in a home, and gain appreciation... while minimizing the cost of financing... I do admit you have to change your thoughts on owning a home, but the stats show that most people spend 7.5 years in their current home, with avg home appreciation at about 5 -6% & that's on the optimistic side...( I know all you CA, & FL guys have seen double digit growth... lets talk in 24 months ) you could grow the principal amount you pay at a potentially much greater rate of return with other investments that are paying cash now... cash now is generally better than cash later... not to mention when you sell realtor commissions, etc... these types of deals are great!... they carry risk ( on all sides ) so If you are going to have to borrow... then do it right.... of course everyone has their own philosphy on borrowing money... I'm just telling you what I see every day.

 

Actualy propety values in CA are starting to slow down.

http://www.dqnews.com/

I am an avid opponent of interest only loan programs. Especiualy the "pay option ARM". They are the most widely missunderstood loan. My company has stopped offering the program because ther are too many layers of risk and there is also a growing consumer constituent that is putting loan brokerage firms out of business in the courts.

There is a greater economic risk at stake. The refi boom has the average bororower churning the real wealth in thier homes into wealth destroying assets like credit cards, vacations, 360's etc. I'm not a loan sales person but I do reject loans everyday if they don't make absolute sense to the bank and the borrower. Every situation is different. I'd say if you have a loan balance to home value of 50% or less, monthly expenses that consume no more than 30% of your total (and easily verifiable) income and you are in the market for an F-car at the flatter part of its depreciation curve; go for it.

 

Sure. You need to consider all aspects of the equation, home equity/value, tax implications, and investment strategy. See the post from DarkHorse above for details on mortgage deductions. I used to think tax strategy was silly, only saved a couple points. Now I know better, that a good tax strategy can hugely magnify your options.

I am not an investment professional so take my advice for what it's worth - nothing. I only relate some of what I'm doing, not making recommendations. Your home will rise in value regardless of the money trapped in it. If anyone thinks rising values equate to "making" money they are wrong. Home equity is not liquid and is difficult to get to if you *really* need it. Pull the money out while it's easy to obtain and invest intelligently. Then you still benefit from rising home value and your "equity" is also pulling in returns. If your investment is tax-sheltered you have yet another gain. Finally the investment is easily liquid so if the worst happens you have access to it. Have an investment professional map it out for you over time. Real eye-opener.

Now you're ready to start thinking about fun loans. You can get excellent rates against investments because the broker is making money on you twice - commissions and interest. You end up paying a couple points on the loan, but the money backing it is pulling a return and is providing a tax benefit. And incidently your home still rises in value.

Mark

 

Best advice I've read here. Those are my targets and I'm getting in the market for a Ferrari now. And if you carry credit card balances don't even think about a Ferrari. Your home is not a giant credit card. Learn money discipline first.

 

This is the catch.

When buying a Ferrari you do not "HAVE TO" borrow. Meaning no one "has to" have a Ferrari.

If you want to that's your business. But it doesn't make sense to me. I buy toys when I have the money for them.

 

Many good points being made here. I am curious about the mention that the bank got cold feet about doing the loan when they found out that it was for buying a Ferrari; it shouldn’t matter…at least it does not with my bank. Additional, using a CD as collateral for the loan and getting charged 1% over the CD rate is good, but you are still not simply paying that 1%. The NET effect is 1% only. Still not bad.

Let me mention a few ideas that may work and be attractive to some future owners. There are those here on the board that I have seen express a distaste for financing an exotic at all, but others might find this the answer to their prayers of getting into a Prancing Horse sooner than later in their life.

I currently work as a Senior Lender for Washington Mutual Bank (Consumer, Business, & Residential loans) in the North Dallas area. Here is what I know can be done, and I currently do for my customers.

We offer either a Home Equity Loan (HELOAN) or a Home Equity Line Of Credit (HELOC) with NO CLOSING costs to the borrower what-so-ever. No, we don’t roll the closing costs into the backside of the loan either. We even pay for an appraisal if one is needed to reach a certain collateral value…and provide the borrower with a free updated copy of the appraisal.

The money borrowed can be used for ANYTHING AT ALL!!! We don’t ask, nor do we care how you use it. (Heck, one guy used the money to go gambling!!!!)

Basically it works like this. Take the current market value of the property times 80%, then minus the amount of the first lien mortgage. Whatever is left is the amount that we can do a loan for….OR, if the property is paid in full, we can do up to 50% of the market value…comes down to we can lend the lesser of the two amounts (Texas regulation).

Example:
Current house value = $300,000. x .80% = $240,000. - $140,000. existing first lien = $100,000. loan or line of credit to be used for a Ferrari purchase.

I, personally, can do loans for Washington Mutual in Texas, Florida, Georgia, Illinois, New Jersey, Connecticut, & New York.

You have a 10 year “draw” period on the HELOC that you can advance money and the principal can be paid down at your own pace with no pre-payment penalty. Any portion of the principal balance left at the end of the 10 years would be amortized over a 20 fixed rate repayment. Of course you can refinance the line at any time and re-set this time clock.

After you advance any amount on the line, your minimum monthly obligation of payment is interest only. This gives flexibility of your monthly budget pinches should they ever happened.

Here is a list I came up with that pretty much covers it all of reasons to get a HELOC & what all ways that you can use it….

Reasons:
Free “insurance” and peace of mind
Lower rate than credit cards
Interest rate will not increase if payment is even one day late
Tax benefits; interest is usually tax deductible
Excellent debt consolidation method
Allows payment flexibility in a budget
Alternative borrowing source
Alternate to a reverse mortgage
Saves money / low cost option
Easy access to your money
Worry free: never use = no cost to you
Prudent thing to do
Easy way to manage cash flow
Smart money management
Ideal for start-up business owners needing capital
One time application with long term usage
Finance flexibility
Supplement retirement income
Unexpected unemployment “tide over”
Allows you future options
Emergency cash for planned, and unplanned, disasters & major life events:
Marriage
Honeymoon
Escrow account
Taxes due
Low rate car financing
Medical bills
Kid’s braces
Bar / Bat Mitzvahs
Quinceneras
College education funding
Home improvement or additions
2nd home or rental property down payment
Cosmetic surgery
Elective /corrective eye surgery
Vacations
Divorce
Death

Ability to buy items that cannot be used as collateral
with a “normal” loan (antiques, hobby or exotic cars (FERRARIS, Lamborghinis, Porsches, etc…..), furniture, boats, livestock, etc…)

ANY major purchase! NO restrictions on how you use your money!

If anyone has any questions about how this works or is interested in getting a loan started in order to start car shopping (or any other use of the funds), PM me or call me at 972-599-4551 (wk) or 214-629-1299 (cell).

Yes, any of you can simply stop by your local Washington Mutual branch & set this up as well. I’m not trying to solicit business, but simply provide some inside information of an option for those that might not have considered this way of getting into a car. Of course, I certainly would not be offended if anyone chose to do a loan with me.


Thanks,
George LaFleur

 

WaMu program sucks. WaMu also has the worst underwritting department and the stupidist guidelines Ive ever seen from a lender. Account reps dont even fully understand their products.

I got a lender that'll go 100%, no closing costs,
no questions on "use of funds" and a 20 year lock conversion from
equity line at 7.99% fixed. Lock/Unlock at an time, 20 year draw
period with a balloon on the end. If fixed rates go down, unlock
and lock at lower rate.

Why limit yourself to 80%? Or even 50%?