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

[Scott MacLean]

Pull your equity and put it into the stock market. You can triple what you are paying in interest rates.

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[Karl_in_Chicago]

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'm not disagreeing - heck, I've been driving my Corvette since before you could legally drive - I'm saying there's spending money and wasting money. Paying interest for 30 years on a car is, IMO, not wise. I'm still trying to wrap my head around people taking out 7 year car loans, though, so what do I know.

 

[russB]

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.

Bad financial logic. You are proposing to exchange 40K of home equity, which is an appreciating asset, for a 40K truck, which is a rapidly depreciating asset. Interest rates has nothing to do with that decision. It's just bad all around.

 

[Lab00Rat]

I could also add in rent is market dependent and is ever changing. Your point is idiotic and no you’re not clear, you make zero logical points. Where did I say everything in life that isn’t tangible value is worthless? Some things you have to actually pay for. You also said nothing about renting “if you’re bad with your mortgage.” Nobody was talking about that.

Your rebuttal is utilities and required insurance have no value? Of course they don’t unless you need that insurance to save you. Or they aren't necessities unless of course you want to sit around in the dark and shit in a bucket because your toilet doesn’t work.

Renting is never a smart venture and is a giant waste of money. Buying a home is an investment, renting is an investment in throwing your money away.

No need to get toxic if you aren't willing to read. My points are not mutually exclusive. You keep trying to separate the points, but come off sounding deranged. Chill.

 

[Bronco4lyfe85]

I'm not disagreeing - heck, I've been driving my Corvette since before you could legally drive - I'm saying there's spending money and wasting money. Paying interest for 30 years on a car is, IMO, not wise. I'm still trying to wrap my head around people taking out 7 year car loans, though, so what do I know.

It’s a few thousand here and there over 6-7 years based on interest rate. If you bought 4 brand new 50K cars on 7 year loans around 3% you would pay I dunno 12ishK interest over that 30 years.

It’s not absurd, is it wasted money? Yes but it’s nothing crazy. People have drug problems, gambling problems and waste money on all kinds of dumb stuff in life. If the worst thing in life you did was drive news cars for 30 years and spend 12-15K on interest that’s not so bad.

I see your point though. I hate interest and know it’s a scam and always try to pay extra to avoid lining the banks pockets.

 

[N3T]

It’s a few thousand here and there over 6-7 years based on interest rate. If you bought 4 brand new 50K cars on 7 year loans around 3% you would pay I dunno 12ishK interest over that 30 years.

It’s not absurd, is it wasted money? Yes but it’s nothing crazy. People have drug problems, gambling problems and waste money on all kinds of dumb stuff in life. If the worst thing in life you did was drive news cars for 30 years and spend 12-15K on interest that’s not so bad.

I see your point though. I hate interest and know it’s a scam and always try to pay extra to avoid lining the banks pockets.

Agree. My simple brain sees interest merely as a cost. If I’m ok with paying that cost (and I’m honest with myself about what that cost really is) then I stop thinking and start doing.

Interesting side tidbit: a lot of times during sudden downturns it’s the most highly educated & smartest finance ppl who get caught out because the chances of it happening are so small. Simple rules to live by can leave a lot of money on the table but can make it easier to keep food on the table. ?

 

[Squatch]

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.

You've got a lot of time to recover if it turns out badly.

If you're keeping your mortgage property until it's paid off, then it'll all work out positive in the end when a new Bronco is $150k MSRP.

Having less obligatory monthly costs can help you weather a period of financial uncertainty like the next pandemic "accidentally" released by China. You'll pay more in the end if you take the mortgage to term, but you don't risk a repo on your Bronco if you find yourself making less money for several months.

 

[SpecOpsHippie]

The math is all elementary school stuff. Easy to figure out based on circumstances.

But the foundation all that rests on is discipline. Discipline will make you wealthy, make you healthier and fit and make your relationships more meaningful.

 

[GeneralBoisvert]

I mean debt is debt. I’m going to refinance anyways (I have PMI and 4.625% interest rate currently) if I can get rid of both of those things, as well as pull cash out it would be nice to have the Bronco paid in full and have the title in hand. If I ever needed to I can sell it instantly. I like that.

The Bronco will not be paid in full. It'll be owed in full, with your house as collateral.

*** slows walks away ***

 

[GeneralBoisvert]

I bought a house 2 years ago at 4.5% and just refinanced at a rate of 3.0%. We added our newer cars loan onto the refinance because it was around 6% and we were paying almost $94 per month just on interest alone.
Now we have a mortgage that is lower than it was previously PLUS we have all of our cars paid off.
Of course, come next summer, the new car that just got paid off is being traded in on the bronco because we'll get more trade in value with it being only one year old.

I just want to clarify that this concept doesn't pay off your cars. Nothing against you or your specific case, just using it as an example. The car note is free in clear but the debt is now hanging on your mortgage.

I can understand this concept if you decide to keep the same auto loan payment and now apply it to the mortgage until the balance is down to its original amount. Otherwise I'm not sure I can see this as a sound financial decision.

 

[Markubis]

I just want to clarify that this concept doesn't pay off your cars. Nothing against you or your specific case, just using it as an example. The car note is free in clear but the debt is now hanging on your mortgage.

I can understand this concept if you decide to keep the same auto loan payment and now apply it to the mortgage until the balance is down to its original amount. Otherwise I'm not sure I can see this as a sound financial decision.

Agreed, the best thing to do is to have pockets of cash and pay everything off as soon as you buy it.

 

[Squatch]

I just want to clarify that this concept doesn't pay off your cars. Nothing against you or your specific case, just using it as an example. The car note is free in clear but the debt is now hanging on your mortgage.

I can understand this concept if you decide to keep the same auto loan payment and now apply it to the mortgage until the balance is down to its original amount. Otherwise I'm not sure I can see this as a sound financial decision.

Hopefully, we all understand this point, but as I like to be an asshole play Devil's advocate, this can also be viewed as transferring the debt of a bad investment into a good investment. Think of it as prematurely raising the price of your house before the market price goes up. As long as the market value goes above it while you hold onto it you're okay.

You could get a better return on your money investing it, probably, but what would he drive? A Blazer?

 

[GeneralBoisvert]

Hopefully, we all understand this point, but as I like to be an asshole play Devil's advocate, this can also be viewed as transferring the debt of a bad investment into a good investment. Think of it as prematurely raising the price of your house before the market price goes up. As long as the market value goes above it while you hold onto it you're okay.

You could get a better return on your money investing it, probably, but what would he drive? A Blazer?

Rolling over a loan of $40,000 @ 5.99%, to a mortgage @ 2.99%, might reduce your interest rate by half and provide the perception that the vehicle is paid off, but the $40,000 becomes $60,000+ over the life of the loan. You'll be paying about $180 for 30 years.

 

[Straight 6]

Seems prudent to keep the transactions separate
Refinance to lower the rate and reduce the monthly then get a regular car loan.

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