A home and a car are two of the biggest purchases most consumers will ever make. But it may surprise you to learn that one can actually help you buy the other. That's right -- you can use a cash-out mortgage refinance of your home loan to buy a new automobile. This method of financing provides a number of advantages, many of which could prompt you to start your engines and head for the nearest lending institution.
Smooth-running mortgage money machine
A cash-out refinance will require refinancing your first mortgage. You'll need to follow the same application and qualification process that you used on your original loan. After closing the refinance, the lender will cut you a check for the cash that you've withdrawn. You can then use this cash to purchase your car.
Tax-deductions and low payments
The advantage of using a cash-out mortgage refinance is that the interest you pay on the loan is tax-deductible. Also, the mortgage rates tend to be lower than those offered by most automotive credit departments. Plus, a favorable mortgage rate can combine with a longer repayment term to provide you with a lower monthly payment.
Second mortgages roaring into first place
If you're looking for a loan that doesn't carry the closing costs of a first mortgage, consider a second mortgage, which includes a fixed-rate home equity loan or a home equity line of credit. You'll be borrowing at a slightly higher rate; but if you plan to pay back the loan quickly, this might be a wise alternative. A second mortgage is an especially good option if your first one has a low rate locked in.
Using home equity to buy an automobile isn't an automatic decision. But if the tax-deductibility and lower monthly payments are appealing, a home sweet home could be just what you need to buy a car sweet car.