Also remember with the home equity loan you also get the benefit of the interest write off on your taxes.
-jc-
-jc-
Question about financing a used NSX
- Thread starter JeffP
- Start date
Which makes the effective rate even lower, comparable to those around 4%. And don't forget that this loan is amortized over 25-30 years, reducing the total payment.
Even if you have a HELOC (Home Equity Line of Credit) at around the Prime Rate (6%), writing off the interest will effectively lower the actual rate to around 4%. If you have a Home Equity Loan, fixed at say 7%, the effective rate will still be below 5%.
If you don't yet have a HELOC and you'd like to get one for the purpose of purchasing a vehicle, try to get one at a higher amount ($60k+), with a minimum draw of $25k or less. At this amount, there should be no cost whatsoever in getting the loan, thus allowing you the benefit of the entire available savings.
But for self employed, put my house up for a "useless" car is not a risk I am willing to take. I would only want to pay cash for " toys". Makes me sleep better at nights. How would you guys think if I put my house up so I can get a F430. Not a smart thing to do right? :wink:jimmycinla said:
pvmike said:
This is all true; but HELOCs very often are tied to the prime interest rate, and if you are planning on paying for the loan over an extended period of time the payments will go up substantially. The interest rates are low, but not forever!!
EIFFEL said:
From the inital post it seemed that a cash buy was not an option for Jeff.
As far as "useless", this might be true but want is a totally different situation. Many of us don't need our second car.
I am a mortgage broker and if you must have this "useless"
car -- as far as the loan option if you can get a home equity loan at a fixed rate near a used car loan rate, go for it. You get the tax benefit and you can amortize it over any term you like(5,10,15,20) and be done early with pricipal reduction payments if you like. Also if putting up your house is a worry and you get into a financial bind, I would bet if you get into a nice NSX for a good price - you'd be able to sell it for close to what you paid IMO.
As far as the F430, cmon, of course not. Two totally different cars within completely different price ranges.
-jc-
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EIFFEL said:
If you live in northern california it's not a big deal to refi your house and put 20-30k down on a car. My friend bought his house for $550k 6 months ago. Just had it appraised to refi and it's at $635k.
Yes, this is true. That's why I referenced home equity loans at a fixed rate as an alternative. These rates are also very low, often under 7%. For those who are unfamiliar with the movement of the Prime Rate, here's a chart for the past 10 years: http://www.nfsn.com/library/prime.htm
It hasn't been that long since Greenspan's been artificially manipulating inflation rates through raising/lowering the Prime Rate...
It's true that most homeowners have seen a significant increase in the equity in their homes, and can cash out some of it to use for a discretionary purchase, say an NSX. However, your friend is still making car payments vis-a-vis paying his mortgage, just perhaps at a lower rate than he could receive on a regular car loan.
pvmike said:
"Artificially" ??? What means that ?
Further, for those of you with a conscience, realize there are some IRS rules related to the deductibility of interst on 2nd mortgage/equity home loans, that must be adhered to to *legally* deduct said interest (e.g. on buying an NSX)
It is NOT a "given". :wink:
Maybe it's the wording. How about this: the Federal Reserve raises rates to lower inflation. Been doing it since Greenspan's first term, starting in 1987.
http://www.bankrate.com/brm/news/loan/19990203.asp
From the article:
"If you have the option to take a home equity loan vs. going out and borrowing money at a higher rate which is not deductible and buying a car, then of course the home equity loan is going to be better," says Sandra Raiter, a tax analyst with the tax preparation firm Jackson Hewitt Inc. in Virginia Beach, Va.
"For home equity, you can deduct the interest on a loan up to $100,000 regardless of where you use the money," says Thomas Langdon, a certified financial planner and tax professor at The American College in Bryn Mawr, Pa. "Let's say your children are going to college and you need extra cash. You can take a home equity loan of up to $100,000 and deduct the interest payments on the Schedule A."
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EIFFEL said:
There have been some great points brought up here, including this one. However, financing a depreciating asset @ 6% is not a bad thing, unless you just don't like making payments. Instead of paying cash for something at that rate, why not take that lump sum and invest it in an allocated asset portforlio of stocks, bonds & cash? The average return for the last 70 years of this 60/25/15 (respectively) split has yielded over 10% annually, after fees and expenses. Check the stats.
So, even if you are paying 6% on 50k, 40k, 30k, or whatever your NSX was, you're earning 10% (average of any 10-year period) with the same amount in a brokerage account. I'll stop here, I know this is boring for everyone but me. Just food for thought.
pvmike said:
My only point was the IRS may disagree as their rules are, as usual, a little convoluted and somewhat difficult to understand (or maybe it's just me :wink: )
http://www.irs.gov/publications/p936/ar02.html#d0e239
NSXGMS said:
This is where I was inferring from the double digit interest rates for an "older" NSX
NSX-GUY: I love your taste in cars, the yellow S4 and blue NSX is a great combo to own for fun and practicality :biggrin: Fast quattro with 4 doors and a nice exotic to boot!
I can see since many of you guys are experts in this mortgage / tax thingy, perhaps you can shed some light on this for a young guy who is new to home loans and mortgages...hehe. I'm a new homeowner so all this is new to me.
When you guys use the term "cash out", are you talking about refinancing your home at slightly lower interest rate to gain cash- how?
Say I have a $470K home that has gone up to $600K but I still owe 350K on it and have a LOC (2nd mortgage of $50K). How do I get money out of this type of thing by refinancing? Does the bank actually give you a check for the difference that it has gone up?
I'm trying to get rid of my LOC and also maybe lower my monthly mortgage payment, and get some cash out for another "toy" maybe...
Sorry for all these newbie questions....
thanks,
rick
Boiled down, you owe $400K on a house worth $600K. You can refinance the $400K on a single mortgage without incurring PMI since you'd be borrowing less than 80% of the value. If you wanted to cash out a bit you could pull up to $80K out and still not incur PMI. You'd now owe $480K on a house worth $600K, and you'd walk away from closing with a check for $80K and a single payment. This all doesn't take into account closing fees, but it's close enough for hypotheticals.
Cashing out and lowering your payments falls into the category of no free lunch. You borrow more, you have to pay more. Name of the game. You currently own 33% of your house. Cashing out $80K means you will only own 20% of your house. I'm conservative with my money, and a roof is more important to me than toys, so I think this is a bad idea. Others will disagree. What I'd do is refinance to pay off the high interest LOC and get your entire balance on one of todays nice low interest first mortgages. If you can pull it off, decrease the time of the mortgage, as that pays huge dividends in how much you pay total. I started with a 30, refinanced to a 20, then when I bought the new house, bought it with a 15 year. I'm 29 rioght now, and the thought of owning a house outright @ 44 is pretty damn cool. Owning a house outright is the biggest obstacle to retirement, so getting that taken care of early means that a retirement in my 50's will be a real possibility.
NSXGMS said:
If anyone out there wants a rate of around 6% on ANY car, including the 91's that so many of us on this site have, call Purdue Employees Federeal Credit Union (PEFCU) in West Lafayette, IN. (765)497-3328. Ask for Mike Metzel. He's the loan officer that helped me, although any of them can assist you. If your credit is good, they'll give you retail for 60 mo's, or usually 90% of retail for 72 mo's. I think the exact rate is 6.09%. Doesn't matter what state you're in either. Not too shabby!
I bought my first NSX with $24K down, financed the rest of it on one of those 12 month no interest/no fees Visa offers and made damn sure it was paid off in 12 months! I paid off the card and closed the account. This worked out OK because I was travelling for work and could expense the payments on the card.
That stategy is not for the faint of heart, if things don't work out, you are so screwed from the interest, read the fine print before you embark on that kind of project. There are so many ways to trip you up and end the no interest offer!
That stategy is not for the faint of heart, if things don't work out, you are so screwed from the interest, read the fine print before you embark on that kind of project. There are so many ways to trip you up and end the no interest offer!
Dave mentions PMI, which is Private Mortgage Insurance. It insures the lender against loss from a borrower's default on his loan, usually required if the borrower's equity in the home is less than 20%. PMI can be avoided if you limit your first mortgage to a max loan to value of 80%; a second mortgage of even the remaining 20% will not trigger PMI.
Another number to remember is the maximum conforming loan amount, which is $359,650. A first mortgage above this amount will be considered a jumbo loan, often with a higher rate than a conforming loan. This is because Fannie Mae and Freddie Mac only buy loans that are conforming, to repackage into the secondary market, making the demand for non-conforming loans much less. (I'd get into this, but it's not necessary for our discussion.)
"Cashing out" means refinancing your first mortgage and taking out some of the equity you've built up in your home by increasing the loan amount on your first mortgage. And yes, the lender does actually give you a check at closing for this amount. But, as Dave mentions, you are of course paying interest for this over the life of the loan.
Without specifics, it's silly for anyone to give advice about what is right for you. Factors include your credit score, income, monthly debt, and current mortgage rates. You could refinance into one single mortgage, a new first and second, or leave your first mortgage alone while increasing the second. Or perhaps you should do nothing with your home mortgages and find alternate financing. It all depends on your particular situation.
Hope this helps. :smile:
Mike
gfunk808 said:
Not true.
If you can lower your rate with a zero closing cost loan(paid by lender,not rolled in) then it always makes sense.
Rates are much lower now then they were a year ago, follow the 10year note for rates >> http://finance.yahoo.com/q/bc?s=^TNX&t=1y .
FYI - almost all home equity lines of credit are ZERO cost. Don't let any broker charge you for them.
-j-
I own mine outright. I plan own keeping it a very long time. :biggrin:
I bought my 91 back in 97 for $43K (it had 11K miles on it so I paid a premium), I put 7K down. I went through a credit union (DCU - Digital Equip Corp's old CU) and financed the remaining 36K for 3 years. In retrospect, I should have bought a house. Now I'm married with a 5 month old, a car worth in the mid-20K's, and no house. Rent costs have doubled since I bought the NSX and my income has halved. I kick myself every night over this. Buy a house first, if you can afford one in today's real estate market. I know I can't unless I move out of New England.
gfunk808 said:
I am a broker.
The fed raising rates has not had a direct effect on our (mortgage) rates. As G-Span puts it, it is a "conundrum".
Mortgage rates are based on investor interest in the bond market, not based on how the Fed raises and lowers rates(much to their dismay), and as you can see from the following chart the 10yr note is lower today than it was 1year ago. http://finance.yahoo.com/q/bc?s=^TNX&t=1y&l=on&z=l&q=l&c=
Also H.E. lines of credit are tied to prime which is set by banks and are usually adjusted after the Fed adjusts his rates.
P.S. If anyone ever has any mortgage questions I will gladly help you out. Just PM me. :smile:
-j-
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I think I'm missing something here - are you trying to say that you can get better rates on mortgages today than you could have gotten 6-12 months ago?!?
Maybe my lender is drinking crazy juice, because he'd laugh if I tried to re-fi now on my 5/1 from last Oct.
Maybe my lender is drinking crazy juice, because he'd laugh if I tried to re-fi now on my 5/1 from last Oct.
Look at the link i gave you.gfunk808 said:
The yield in oct/04 was close to the yield today(rates will be close today to what you have). Also note that the yield has dropped twice below the yield from Oct in the past 2 months.
The yield in July/04 was higher than todays market.
*As investors buy into the bond market yields deline. As yields decline so do mortgage interest rates.*
-j-
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