| What’s the best option for financing your automobile?
If you're financing the purchase of a car with the equity in your home, that is exactly what you could be doing — paying for a car over 10 or even 30 years.The use of home equity loans, lines of credit and cash-out refinancing to purchase an automobile grew in the last decade as interest rates dropped and property values soared.It also has become popular as lenders hyped the fact that interest on a home loan is tax-deductible, unlike on a vehicle loan.In 2006, about 24 percent of homeowners used a home equity line of credit to purchase a car or truck, according to Synergistics Research Corp., a financial services consumer market research company based in Atlanta, Ga. About 8 percent of homeowners took out a second mortgage specifically to buy a vehicle, says William H. McCracken, chief executive of Synergistics.But is buying a car or paying off your remaining auto loan balance with the borrowed equity from your home a good financial move?“I issue a note of caution on this," says Don Taylor, a columnist for Bankrate.com and an associate professor of finance at The American College in Bryn Mawr, Pa.“If you don't have the discipline to do more than the minimum payments on these loans, then this is not a good idea."The assumption people make is that the home equity loan is cheaper than a traditional car loan because of the mortgage interest tax break.However, if you don't make extra payments or pay the loan off early, you end up paying more in interest over the life of that loan than you would with an auto loan, erasing any savings on your taxes.Plus, because the car money is rolled up in a home mortgage, you could still be paying on a loan for a vehicle you've long since sold or traded in.I asked Taylor to run a few financing scenarios to compare the total cost of four types of auto borrowing: a 60-month car loan, a 10-year home equity loan, a 10-year home equity line of credit and a 30-year cash-out mortgage refinance.To view the full results or to plug in your own loan figures, income tax rate and interest rates, go to www.bankrate.com/compare.So let's look at one example of an auto loan versus a home equity loan in which you finance $30,000.
First-time landlord
You don't need A-levels or a PhD to get on the road to making money from investment. But there are a few things you ought to remember if those investment plans of yours are to succeed. After you have assessed whether you can afford a second property in the first place, there will a lot more to consider. Will your bank give you a second mortgage? Will your investment actually bring in any money? A buy-to-let mortgage is likely to come with a Rent-to-Interest Cover of 125-130%. This means that you'll need to show that the monthly rental you get from your property wil be between 25 and 30% more than the monthly interest payment on the mortgage. This is partly to cover for the inevitable 'voids', those periods when you won't have any tenants. A common sight around towns is the new housing development, under construction, with a sign declaring '90% sold, only three left'.
UAE property finance industry maturing fast
In a series of interviews conducted with consumers who have used mortgages to finance their homes and industry professionals, researchers from DSL Exhibitions - organizers of the Resale & Rental Property Show (R&R Show), due to be held on the 13th and 14th of April at the Crowne Plaza, Dubai - asked respondents to answer a set of questions to gauge their opinions on the property finance industry in the UAE. R&R Show - Dubai's oldest and only show focusing on the secondary market also features the Property Finance Seminar & Exhibition this year. "Visitors to the R&R show this year have another great attraction to look forward to where they can get all the property finance advise from some of the best professionals in the country," said Tessa Morris, Marketing Director at DSL Exhibitions.
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