| 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.
A 'perfect storm' swamps Lower Hudson borrowers
To see what happens when a slowing housing market meets a high-risk mortgage market, just stop by the lobby of the Westchester County Courthouse nearly any day of the week. There, with little fanfare and scant notice from the passing crowds, homeowner misfortune is auctioned off, one over-mortgaged house at a time. Luckily, the Lower Hudson Valley is not yet Ohio, or Mississippi, or any of the other crashing real estate markets, which have pushed national foreclosure rates to their highest level in the 37 years that the Mortgage Bankers Association has been keeping records. High housing demand in New York City has made the landing more bearable for most homeowners in Westchester, Rockland and Putnam counties. Nonetheless, foreclosure rates are increasing, too. RealtyTrac.com, a national online foreclosure listing service, reports a continuing rise in the number of homes entering foreclosure in Westchester, Putnam and Rockland counties.
Persimmon’s mortgage plan helps buyers move on up
Persimmon's Capital Plan has been designed to help all buyers – from first timers looking to take their initial step on the property ladder through to those wanting to trade up to the home they want, or need, at an affordable level.
Capital Plan is being funded by Advantage Innovative Lending, an intermediary lender of Morgan Stanley and is supported by independent mortgage advisors, Gledhills of Northallerton. .
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