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

[Bronco4lyfe85]

I agree with you. That’s why I was pointing out our mortgage is cheaper than renting in our neighborhood.

It’s obscene anymore!

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[Karl_in_Chicago]

Our house is cheaper than renting a 2-br apartment in our neighborhood in Denver. Rent vs buy can depend on where you live and how much you can put down, which I think is the main roadblock for a lot of folks. I do agree that debt is a bad trap for a lot of people, but mortgages can also make sense as long as you don’t over-extend yourself.

I'm seeing a bifurcation of messaging in this thread. I'm not seeing where anyone is seriously saying a mortgage is a bad idea. I'm seeing, and seconding, that applying a mortgage to purchase a car is not necessarily a good idea. I'm debt adverse but use it when I need it. I paid off my 30 year house mortgage in 15 years and I've never carried an auto loan to term - my last 3 year loan was paid off in 18 months. Mortgages are great for sustainable assets like houses or condo's - I can't see using one to purchase an asset that is, IMO, non-sustainable with a high depreciation rate like an automobile. With a house, generally, one expects there to be some appreciation in value or at the very least no loss in value (and obviously this is location specific and needs to also ignore relatively recent turmoil in the housing market) for this long term investment. In short, one expects the house to maintain or increase its value over the term of the loan. Conversely an automobile (with some very few exceptions) *loses* value year over year - so why commit to a fixed amount of interest payments over such a long term while the thing parked in your garage continues to bleed value?

 

[Bronco4lyfe85]

I'm seeing a bifurcation of messaging in this thread. I'm not seeing where anyone is seriously saying a mortgage is a bad idea. I'm seeing, and seconding, that applying a mortgage to purchase a car is not necessarily a good idea. I'm debt adverse but use it when I need it. I paid off my 30 year house mortgage in 15 years and I've never carried an auto loan to term - my last 3 year loan was paid off in 18 months. Mortgages are great for sustainable assets like houses or condo's - I can't see using one to purchase an asset that is, IMO, non-sustainable with a high depreciation rate like an automobile. With a house, generally, one expects there to be some appreciation in value or at the very least no loss in value (and obviously this is location specific and needs to also ignore relatively recent turmoil in the housing market) for this long term investment. In short, one expects the house to maintain or increase its value over the term of the loan. Conversely an automobile (with some very few exceptions) *loses* value year over year - so why commit to a fixed amount of interest payments over such a long term while the thing parked in your garage continues to bleed value?

Cars are a bad investment and always will be. With that said you have to spend your money on something in life and tomorrow is never guaranteed. Might as well enjoy the time you have while you’re here.

I’ve driven a sports car for the past 8 years, since I was 27 and I’ve never regretted it for one second and it’s been a huge waste of money the whole time switching cars now 3 times. Everyone always touts MPG and i’m all smiles per mile, wouldn’t trade that money for the fun I’ve had.

It’s only money, can’t take it with you.

 

[That_Hal]

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.

This is a terrible idea.
It's not 40k over the life. Look what the 40k end up really being over the life of your loan.
If you can't afford the Bronco without doing this I would suggest not buying one.
If I end up having a loan on a car I normally pay it off in less then 12 months. Just be financially tight and put extra money towards your purchase.

 

[That_Hal]

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.

15 year mortgage is the only way to do it. I will have my house paid off in less then 7. I seen a couple people here saying it is just money you can't take it with you. Umm yes I can into earlier retirement... I will take a lot with me.

 

[stras27]

I am going through a smallish streamline refi to save $400 a month and open up cash flow to be able to help with the purchase.

 

[Nickp]

Cars are a bad investment and always will be. With that said you have to spend your money on something in life and tomorrow is never guaranteed. Might as well enjoy the time you have while you’re here.

I’ve driven a sports car for the past 8 years, since I was 27 and I’ve never regretted it for one second and it’s been a huge waste of money the whole time switching cars now 3 times. Everyone always touts MPG and i’m all smiles per mile, wouldn’t trade that money for the fun I’ve had.

It’s only money, can’t take it with you.

This is basically my stance. As a 24 year old I am probably a complete idiot for even considering buying a car that costs 70% of my gross income. But cars (especially the bronco) are a hobby and worth the splurge to me. People spend tons of money on clubs, drugs, whatever. I’ll spend my money on a dumb car.

 

[ColoradoGuy]

Cars are a bad investment and always will be. With that said you have to spend your money on something in life and tomorrow is never guaranteed. Might as well enjoy the time you have while you’re here.

I’ve driven a sports car for the past 8 years, since I was 27 and I’ve never regretted it for one second and it’s been a huge waste of money the whole time switching cars now 3 times. Everyone always touts MPG and i’m all smiles per mile, wouldn’t trade that money for the fun I’ve had.

It’s only money, can’t take it with you.

I agree with you... up to a certain extent. Enjoy and reward yourself but plan for security in the long run by making good financial decisions. The line should be drawn where you are living within your means or if you go beyond that, you put that security at risk and can easily end up as a greeter at a big box store when you are 70 instead of enjoying your retirement.

TLDR; Don't use your home equity to buy a vehicle, especially not a recreational vehicle

 

[hemiblas]

I like this plan and your reasoning makes perfect sense. If you have no credit card debt and all you'll have is this mortgage payment then its a good plan. You'll have the money up front to give to the dealer and wont be surprised by whatever financing deals they have. We need our cars to go to work and make a living so you might as well make it a fun drive!!!

Your total monthly payments will be lower in case you run into any trouble.
Interest is interest whether its on your home or on your car
If you have extra money you can make an extra payment on your home.
If you convert this to a rental you'll be able to write off the interest in its entirety.
Because of the way the tax laws changed you probably can't write off the interest right now
and the most important
This will help you get more dates!!!

 

[kodiakisland]

Current mortgage is 2.65%, but no, I would not take cash out for a vehicle. Airplane maybe.

 

[KindaOrange]

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.

All about cash-flow. If you stay disciplined (using the "would-be car payment") to pay down extra on the mortgage, this isn't a bad idea.

But do you have 5 years worth of that self-discipline? Ramsey would assume no.

 

[Mac n Nevada]

I don't see a problem with it, I did it years ago to buy a Harley ( mid life fun phase) . You are basically incorporating you car payment into your condo payment.

If in fact it is going to become a rental property, hopefully the rent is covering the mortgage, or at least close. ( I prefer a cash flow) Most importantly, Phoenix is a good real estate market and your condo will most likely ( pandemic, election, riots and looting withstanding) appreciate 3-5 % a year and that will help pay you your money back .

Hell, the Bronco is basically free!

Just so you know my credentials:

I throw people off of buildings for a living. I have no financial wisdom at all. I am not an agent or an accountant. Actually, have been told I suck at finances, because it is probably true. I am debt free with a little cash in the bank, a pension and a well paying job. I also own a few houses, so there is that.........but I suuuuccckk with money. .: )

 

[North7]

As the kids say, YOLO and life without a Bronco isn’t a life worth living to me.

This is basically my stance. As a 24 year old I am probably a complete idiot for even considering buying a car that costs 70% of my gross income. But cars (especially the bronco) are a hobby and worth the splurge to me. People spend tons of money on clubs, drugs, whatever. I’ll spend my money on a dumb car.

It's absolutely your money to spend anyway you wish, justifying it because it's not a drug habit, well, in a way it is.

long term goal is to turn it into a rental property.

So once all your monthly payment goes towards the condo, are you still on track with savings to purchase that next piece of real estate you want, after you turn the condo into a rental?

So wouldn’t need to tap the equity in the future

Except, in, 2-5 years when you want to trade the Bronco in on a Braptor or the next hot ride.

So in summary, take out a 30 year mortgage, for a 5 year car payment, and repeat this every 5 years, when you are finished, you will be able to afford all the new rage, a tiny house, by then, maybe you will have kids, it will be cozy.

 

[doink]

A lot of info in this thread. Safest and most conservative play would probably be this:

I'd take out the 40k in equity, YOLO it into $TSLA calls/puts (depending on your stance) and use those sweet tendies to get the Bronco in cash and pay off your condo.

/s

 

[North7]

A lot of info in this thread. Safest and most conservative play would probably be this:

I'd take out the 40k in equity, YOLO it into $TSLA calls/puts (depending on your stance) and use those sweet tendies to get the Bronco in cash and pay off your condo.

/s

Sounds like a sure fire, can't miss plan.

/s

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