*Look away Dave Ramsey enthusiasts* -- Buying Bronco with cash out home refinance?

[Beach_Bum]

I'm in an opposite situation. I've been paying down my mortgage aggressively since my first payment. I now have less than $25K in principal remaining at 2.9%. I'm now trying not to pay extra but it is such a habit. Part of me hates to be in debt and wants to own it outright. But the other part of me realizes that I'll never get a loan at that rate again.

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[Firefly]

Oh yeah it would be absurd. It would be over $60k. But I would just make the “car payment” as an extra principal payment every month. (Or maybe a bit less and use the extra cash flow to max out my Roth)

Ok. That math would be much more friendly. ?

 

[JH1026]

This is not a good financial move at all. 3.5% interest on that extra $40k over 15-30 years is going to be TENS of thousands of dollars. But your bank will love you.

 

[Scohin]

So I did a 2nd Mortgage to consolidate my Car and CC into one lower payment, and the interest rate was way higher than I would've liked. So I Refinanced my two together and now pay less on my Mortgage than before and have my car to use as a trade in. I'd only do it if it makes fiscal sense

 

[theguda]

I have been a mortgage originator for 22 years and I'll say this....most people in your situation would INTEND to add extra to the payment each month to pay the balance down fast. However...the reality is most actually don't. Instead, they'll make the smaller payment and justify the savings to accumulate more debt. They'll say "I'm paying $100 less per month than before so I can take that $100 and buy <insert item here>"

Not saying you would do this but you'd be surprised at the amount of clients I have done cash out refinances for who paid off all their debt....only to call again a year or 2 later because they have racked up a ton of debt again. Just be careful.

Also...if anyone is buying or refinancing a home in Indiana or Kentucky just give me a shout. My mortgage B&P is always available!!!! LOL

http://www.facebook.com/cleartoclosemortgage

 

[Garbone]

Doing a basic mortgage calculator I can pull out $40k and my payment would barely change due to my rate reduction and getting rid of $100 PMI.

I like some of his info but some of it is god awful. Like only doing a 15 year mortgage is terrible advice.

No, get a 15 year if you can and make 1 extra payment a year. No mortgage is a heck of a lot nicer than a "low payment".

Heck, I have had my Mustang almost 15 years.

 

[FourHorses]

Don’t forget closing costs.

 

[j_marinelli]

We actually did a refi early this year just so we could get rid of our PMI . That alone is worth the refi. As for using equity to buy a car, that is something you just gotta look at and do what makes the most sense for you. To me it is no different than those that do it to pay off credit card debit (a car loan is a form of debt after all!). One thing to consider is to look at long term plans while you live there. Do you think you will ever want to do home improvements to which you might utilize that home equity from?

 

[North7]

Anyone looked into doing this? Probably not the most financially savvy thing ever... but with how low rates are and how much home prices have gone up I’m kinda considering it tbh. I could basically have my mortgage go up $25 a month and pull out $40k or so with how rates are currently. And at 3.5%ish interest that’s going to be better than any deal on financing the Bronco most likely. Of course I would do this and pay a lot extra on the mortgage to pay it down early. Would just be nice to have lower monthly obligations.

So this means your future is secure, your emergency fund is full, your retirement funding on track, your 529 funding on track and zero other bills?

Some of us understand priorities, and drove lesser cars to be in that position, now I will be paying cash for my Bronco.

 

[Nickp]

Don’t forget closing costs.

I’m refinancing either way. Would just likely be higher.

We actually did a refi early this year just so we could get rid of our PMI . That alone is worth the refi. As for using equity to buy a car, that is something you just gotta look at and do what makes the most sense for you. To me it is no different than those that do it to pay off credit card debit (a car loan is a form of debt after all!). One thing to consider is to look at long term plans while you live there. Do you think you will ever want to do home improvements to which you might utilize that home equity from?

I actually renovated the whole place already (it’s a condo) by myself. So wouldn’t need to tap the equity in the future, long term goal is to turn it into a rental property.

 

[Nickp]

So this means your future is secure, your emergency fund is full, your retirement funding on track, your 529 funding on track and zero other bills?

Some of us understand priorities, and drove lesser cars to be in that position, now I will be paying cash for my Bronco.

Emergency fund and retirement are on track, although I only put money in my 401k, not Roth IRA right now. That is one of the main advantages I’ve thought about with doing this vs a traditional auto loan is I could max out my Roth IRA instead of making a car payment. I’m a big investing guy so if I can get cheap debt and invest more because of it... definitely something I’d consider.

 

[N3T]

Anyone looked into doing this? Probably not the most financially savvy thing ever... but with how low rates are and how much home prices have gone up I’m kinda considering it tbh. I could basically have my mortgage go up $25 a month and pull out $40k or so with how rates are currently. And at 3.5%ish interest that’s going to be better than any deal on financing the Bronco most likely. Of course I would do this and pay a lot extra on the mortgage to pay it down early. Would just be nice to have lower monthly obligations.

Not understanding the drive to do this? At my credit union (nothing fancy) auto loans are already at 2.4-3.2% for 39-84 months so the interest rate is the same. If you refi the house you’ll have the same monthly payment together with the car pmt. If you have a car pmt I’d be willing to bet an 8 crust pineapple pizza ? that you’ll be far more motivated to pay down the car than you’d be motivated to pay the larger condo loan.

Personally I think it’s great that you have plans to turn it into a rental but you’ll kill your ROI if you lump a $60k car into the loan and hate yourself later. Plus, life happens and it’s hard to predict what happens next. ???

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