Car Purchase - Borrow more on mortgage or Personal Loan?

Ebe_Scrooge

homaho wrote: »

Although we won't be able to borrow more from mortgage for the car purchase, out of curiosity, would it be possible to specify a short term, say 3 years, for the extra borrowing so that it would pretty much work out like a personal loan if we are not using HTB?
I suppose the extra borrowing will be calculated alongside the main mortgage, as if it is a separate mortgage, rather than adding it to the big sum and have to spread across the entire term of the main mortgage?

I stand to be corrected here - it's a long time since I took out additional borrowing on my mortgage. But in general any additional borrowing will be repayable over the full (remaining ) term of the existing mortgage ( which is why you have to consider how much interest you'll be paying, even though the APR may be nice and low ). Having said that, I think some lenders will allow the additional loan to be over a shorter term.


But, 2 things to be aware of. Firstly, most mortgage lenders will only give you a further advance for things which will add value to the house ( extension, new kitchen, refurbishments, etc. ) And they won't lend you anything if it pushes the LTV above whatever limits they have in place.


Secondly, think VERY carefully about securing a loan against your house, for whatever purpose. Think about it - a personal loan for a car, you find yourself unable to make repayments for whatever reason, the lender then has to take you to court etc. to try and recover their money. And for a relatively small amount they may not even bother, or may take a token payment, or may try and take the car. But if the loan is secured against the house, they could - in theory - just immediately reposses your house without too much hassle for them. There's a reason why a secured loan is much cheaper than an unsecured one - it's simply because the lender can pretty easily recover their money if you stop making payments :eek:

MataNui

mcpitman wrote: »

Who'd have thought you would get money saving advice on a Money Saving Forum?

Well. I did give money saving advise. Good advise really. Money saving isnt about just blanket doing without or making do with less. Its about getting what you want (Or a reasonable compromise) at the best possible price.

I wouldnt go for a new car. I have only ever bought used. Two main reasons.
1. I dont want to be the person taking that huge initial depreciation hit.
2. Even though i could afford a car of a particular type new i know that i would stretch myself into something i honestly couldnt afford by the time i added all the extras i would need to really enjoy it.

So i shop around the used market nationally till i find what i am after. As far as funding it goes my max budget is what i can afford to pay cash for. Doesnt mean i will pay cash though. I am happy for example to get cheap finance (IF i can) for the minimum amount needed to get the best rate if that means i retain the peace of mind of having a buffer in my account.

I think as far a 'money saving' thats not really too bad regardless of what i am spending.

norsefox

5 year free warranty so that we do not have to worry about repairing etc as long as possible.

Surely you'd be better buying a Golf for £7k (very reliable small family car), and putting £300 aside each month for any potential repairs.

If you need the money, great, you've saved it and it's affordable.

If you don't need the money, great, you've saved money that would simply have been spent on a shinier but depreciating asset.

mcpitman

MataNui wrote: »

Well. I did give money saving advise. Good advise really. Money saving isnt about just blanket doing without or making do with less. Its about getting what you want (Or a reasonable compromise) at the best possible price.

I wouldnt go for a new car. I have only ever bought used. Two main reasons.
1. I dont want to be the person taking that huge initial depreciation hit.
2. Even though i could afford a car of a particular type new i know that i would stretch myself into something i honestly couldnt afford by the time i added all the extras i would need to really enjoy it.

So i shop around the used market nationally till i find what i am after. As far as funding it goes my max budget is what i can afford to pay cash for. Doesnt mean i will pay cash though. I am happy for example to get cheap finance (IF i can) for the minimum amount needed to get the best rate if that means i retain the peace of mind of having a buffer in my account.

I think as far a 'money saving' thats not really too bad regardless of what i am spending.

Borrowing money on an interest bearing basis on a heavily depreciating assett is not "money saving" advice.

In the purest sense of it, if you have to borrow you cannot afford it (otherwise you would have the cash and not need to borrow).

The want/need debate is a very good starting point for any financial decision. It then comes down to personal choice.

My personal choice is that if I need to borrow for it (unless it is at 0%) I can't afford it.

If I were in the OP's position, I wouldn't be borrowing for a car over 20 years and I would be considering using my savings to finance a car I can afford.

chelseablue

Also, just because you have a baby doesn't mean you need a brand new car.

When my son was born my car was 8 years old (was very safe as had ISOfix for the car seat base) still got the same car and its now 11 years old.

Honestly the baby wont mind (or care)

tykesi

chelseablue wrote: »

Also, just because you have a baby doesn't mean you need a brand new car.

When my son was born my car was 8 years old (was very safe as had ISOfix for the car seat base) still got the same car and its now 11 years old.

Honestly the baby wont mind (or care)

It's hilarious how many new parents all of a sudden decide they need a new SUV when a baby is born - "cos it's safer, innit". More like keeping up with the Joneses outside the nursery!

chelseablue

tykesi wrote: »

It's hilarious how many new parents all of a sudden decide they need a new SUV when a baby is born - "cos it's safer, innit". More like keeping up with the Joneses outside the nursery!

:rotfl: you'd be amazed at the amount of 4x4s that turn up at my sons nursery at pick up time. I'm the poor relation

Mogley

homaho wrote: »

Pre-reg vs Older 2nd Car
The car that we are thinking to buy is a Hyundai Tucson Auto SE Nav.
We are planning to have baby soon (although no baby just yet) and feel we will need a bigger car than my current super mini hatchback.

If you really do want a new and bigger car for the reasons you set out, don't be rushed into buying one right now. Consider saving the amount you think you can afford on the loan payments every month and continue with your super-mini until the baby arrives. If you then can't manage with your current car, you will be in a financially stronger position to buy the Auto SUV of your dreams. In a year's time you could have £10k of savings plus your car to put towards it meaning lower monthly payments and more to spend on your child. Children are expensive!!

One other mental model to think about. If you had worked hard to achieve £22k in savings and had the money available to you right now, would you buy that car?