New York Firearms Forum banner
1 - 18 of 18 Posts

·
I wish I were an Oscar Meyer Weiner
Joined
·
6,795 Posts
Discussion Starter · #1 ·
Ok so as some of you know next year I plan on hopefully buying a house. It's obviously a big decision and purchase and wanted to run something by you guys for your opinion.

So I have enough for a down payment for the price range I have decided on. I currently have about a $300 a month car payment. If I stay at my targeted PITI payment and still put 20% down would it be better for me to pay off my car loan as well? I think I still owe around 10K lets say.

I understand the argument that the car loan is less of an interest rate and essentially rolling it into the home loan is not a good idea because home loan is higher % rate but if I can get rid of a roughly $300 month payment and raise PITI goal payment by roughly $70 wouldn't that be a smart move assuming I still pay that difference towards principle every month?

My thought process is that it gives me an extra $200 a month to play with if something ever came up.

Thanks for your thoughts and opinions.
 

·
Registered
Joined
·
2,743 Posts
Can you think of any good reason why it would be a good idea to pay for a car for 30 years? That's your answer.

If the car note and mortgage are going to be too much, pay off the car, then buy a house. Whatever you do, save up enough of a down payment to avoid PMI. Just my $0.02
 

·
I wish I were an Oscar Meyer Weiner
Joined
·
6,795 Posts
Discussion Starter · #3 ·
I can afford the house and a car. I am just liking the idea of owing less every month in case of emergency and the money saved will still be going towards principle. If I pay of car or not I will still have at least 20% going down on house so I will not have PMI.
 

·
Registered
Joined
·
203 Posts
Generally speaking you want to pay off your loans in order of APR (highest APR first). So if car loan has lower APR it does not make sense to pay it off first.

This assumes everything else being equal, though. If, for example, you can get cheaper car insurance on a car that you paid off, or if mortgage rate depends on downpayment amount, then the math can be different.
 

·
I wish I were an Oscar Meyer Weiner
Joined
·
6,795 Posts
Discussion Starter · #6 ·
I might be using a VA loan but not sure but still going to put more the 20% down which some have said a conventional loan may be better since I have good credit. I am also going to be utilizing some grants as well that I qualify for.
 

·
Registered
Joined
·
2,769 Posts
Difficult answer. In years past I would have said to save the lump sum in an interest bearing account instead of paying off the car. If the need for the money arises you can always withdraw it and either pay off the car at that time or use that lump sum for the emergency. However, interest rates being what they are (non existent), that advice doesn't play out too well.

Next, I could also make a case for using the money to pay down the car to 10 payments remaining in order to lower your installment debt by that $300/month in order to qualify for your mortgage. That doesn't seem to fit your scenario either since you say you qualify for the 80% LTV even with the car loan outstanding.

Third, you can use the lump sum to increase your downpayment and take a smaller mortgage. This idea doesn't give you the reserve you were looking for to aid in the unforeseen emergency.

Now you know why I said this wasn't an easy answer. YOU need to take into account your own emotional well being. Some people want the lower debt. Other people are more comfortable with money in the bank. Others don't worry about money and spend as if today is their last day on this planet. Only you can answer the question, 'What is your comfort zone? Your safe haven?'

Sounds like you've set yourself up pretty well if this is the 'tough' decision you need to make. Nice work. Good luck with your pending home purchase.
 

·
I wish I were an Oscar Meyer Weiner
Joined
·
6,795 Posts
Discussion Starter · #8 ·
I hate owing money, I carry no credit card debt but have been using all my cards lately to buy small stuff and pay it off to keep them active.

Even if I pay off car I am thinking I will probably be putting 30% down on a house. I guess I just like the idea of only having 1 loan out and the lower debt to income ratio vs having 2 loans and higher debt to income ratio.

I guess I am just trying to make sure there is not something I am not seeing which would make this a real bad idea. Worst case scenario even though I am paying more in interest potentially I can at least write that off I assume since I take a standard deduction currently. At this point also the biggest thing for me to get a house next year is for continued low interest rates. I think I figured 5.5% interest rate was around max for me to get the house price range I want and the taxes I assume I will have to pay and still be comfortable.

Right now I have money in CD's which are getting me close to 1%. Which compared to everything else is not bad. I will have to take a 3 month penalty when I pull it out though since I put it in a 60 month call CD to get the best rate.
 

·
Registered
Joined
·
1,650 Posts
Since you sound like a financially conservative guy, I'm betting you claim zero for fed and state taxes? If so, once you have the house and a nice interest deduction, could you start to claim one if you needed the extra cash during the year? Then you can stop giving the government an interest free loan. Just a thought. Good luck. Get a good real estate lawyer and have the home inspected with a passing grade as a contingency of your offer. Sorry if you already know all this stuff, but it's important and I just wanted to mention it..
 

·
Registered
Joined
·
5,053 Posts
Get a GOOD home inspector. Preferably someone you know. Even if not certified, but a contractor you trust. I had a PE recommended by my agent and that was a mistake.
 

·
Registered
Joined
·
554 Posts
When your ready, PM me and I can help you with Title Insurance. NY is a mandated state, so regardless of who you use the premium will remain the same, but I will help you process smoothly and I have a fantastic group of people that can help with related services.

Either er way good luck with everything. It is an exciting time and inevitably becomes stressful. All the more reason why you should get all your ducks in a row now.


FUAC FUAC FUAC FUAC
 

·
Registered
Joined
·
11,238 Posts
Here a new concept for folks starting up.
Get a nive piece of land in a rural setting w. low taxes.
Build your house as you go according to your needs and budget.
Your work and skills translate into instant equity.
No need to worry about feeding the bank.
If I was young and single I would consider a modular system.
You should see what they do with old shipping containers
these days. Functional, flexible, fun and cool.
 

·
Registered
Joined
·
1,102 Posts
I think the way you should look at it is like at the end of the day what is yours? That is my approach, so if anything happens then at the end of the day you know what is yours and noone can take.
 

·
I wish I were an Oscar Meyer Weiner
Joined
·
6,795 Posts
Discussion Starter · #14 ·
I think the way you should look at it is like at the end of the day what is yours? That is my approach, so if anything happens then at the end of the day you know what is yours and noone can take.
Thats a good way to look at it as well. I never really thought of it that way. If I paid of my car and something happened at least I would have that instead of losing both.
 

·
Registered
Joined
·
2,719 Posts
Also consider in your math the option of dropping expensive comprehensive ins on the auto when the loan is paid off
I usually wait until the auto is 4+ yrs old, pay off the loan, then drop comp ins, saving $$ . I have never regretted doing this, because I never had reason to pay out for repairs. But your situation may be different, just a thought.
 

·
Registered
Joined
·
1,755 Posts
As a VET you can get a VA loan with very little down. Take some of your down payment and pay off the car, like was said before you really don't want to pay 30 years on the car.
 

·
Registered
Joined
·
2,769 Posts
As a VET you can get a VA loan with very little down. Take some of your down payment and pay off the car, like was said before you really don't want to pay 30 years on the car.
Sorry kgun, you've got that backwards. If he uses some of the downpayment to pay off the car, he is in effect converting the car loan to a mortgage and paying the car for 30 years. Remember, in your scenario he increased the mortgage in order to pay off the car.
 

·
Registered
Joined
·
1,755 Posts
Sorry kgun, you've got that backwards. If he uses some of the downpayment to pay off the car, he is in effect converting the car loan to a mortgage and paying the car for 30 years. Remember, in your scenario he increased the mortgage in order to pay off the car.
Didn't look at it like that, but you are correct!
 
1 - 18 of 18 Posts
Top