borrowing on mortgage for new car

hunlom

Hi all. im due to re-mortgage this nov(2014) after being on a fixed 3yr term. ive £40k left on 17 yrs...house is worth approx £ 225k...we pay £275 a month repayment which we can meet quite comfortably...What we are wondering is would it make any sense to borrow an extra £8-£10k to upgrade our car....We have plenty of equity in the house and would be able to meet the extra easily.
The interest rate is less than can get a loan ..any ideas or help please ??? steve

pmd123

If you're looking at buying a "new" car, then there is every chance they will offer you 0% apr credit (all being good with your credit history), that's what I got on my new car, made it much cheaper than buying equivalent 1 year old model over the same period.

shop-to-drop

By putting a new car on the mortgage you will be taking out a 17 year loan for a car, the APR may be lower but the total amount of interest you will have to pay would be far more. Not really a good idea.

kingstreet

If you schedule short-term borrowing over the term of a mortgage, make sure you use the interest saving wisely.

If the cost of a personal loan over 5 years is say, £300 per month and the cost of the mortgage route is £200 for the car element, make sure you overpay the £100 per month difference, so the notional amount of the car loan is repaid over the shorter period of time.

Simply having a £100 per month saving and blowing it on other stuff is the potential true cost of your plan.

trailingspouse

Also, if you're taking out long term loan to pay for a car, how long are you planning on keeping the car for? Do you really want to still be paying for a car 10-15 years after you've replaced it?

Senior_Paper_Monitor

Borrow it, calculate what the loan would cost you (monthly) under normal arrangements and make a payment of extra (after deducting the long term mortgage component for the extra loan) by standing order using any overpayment facility (most mortgages have this). Make sure you don't exceed the overpayment allowance.


You will be asked the purpose of the extra borrowing - many lenders will not accept car purchase.


Some lenders will let you split the new increased loan into 2 parts - repayable over different terms.




Being a cash buyer may enable you to get a better purchase price than the 'interest free' packages (if buying second hand be aware that many garages make more out of the finance package - and warranty - than actually trading the car .... so perhaps not best to let the 'funds available' information out too early in the haggling process).

CLAPTON

you have (relatively) low mortgage outgoing sna you can 'easily' afford to pay more
had you considered saving the spare money to buy a car (or indeed other future requirements)?