| 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.
US Foreclosure Filings Rise 12 Percent in February (Update3)
March 26 (Bloomberg) -- U.S. foreclosure filings last month jumped 12 percent compared with a year ago as owners struggled with declining home values and higher adjustable mortgage rates. More than 130,000 homes entered foreclosure last month, according to a report from RealtyTrac, an online listing of foreclosed properties. That's the second-highest since RealtyTrac began collecting data in January 2005. The worst housing slump in more than a decade is pushing down home prices and hampering the ability of owners to refinance mortgages. Borrowers with poor or incomplete credit are also vulnerable to mortgages that are resetting at higher rates than introductory or so-called teaser rates. ``The rise in foreclosures over the past year probably only marks the beginning of the problem,'' Jan Hatzius, a Goldman, Sachs & Co.
When Should You Refinance A Second Mortgage?
A second mortgage allowed you to get the house that you wanted or to have extra cash for some project - but that was a few years ago. You have built up some equity in the house and are now wondering if it would be a good time to refinance your second mortgage. Here are some things you need to know in order to help you make that decision intelligently. .
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