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  • FIRST POST
    • edallen41
    • By edallen41 11th Aug 18, 10:22 AM
    • 11Posts
    • 3Thanks
    edallen41
    Money for car - loan or mortgage
    • #1
    • 11th Aug 18, 10:22 AM
    Money for car - loan or mortgage 11th Aug 18 at 10:22 AM
    Hi,

    Just hoping for a bit of advice on best option for purchasing a new car.

    We are in the process of remortgaging at the moment and are about to submit an application. This is for 265k on a house valued at 500k (for personal reasons, this is not actually redeeming a current mortgage - repaying loan to mother in law who kindly helped us over the last year while we got settled with new jobs. She technically has a charge on the property which will be removed). This will be on a 5 year fix at 1.89%.

    We also need a new car, for which we need 15k. We will be buying rather than PCP, lease or hire/purchase as we do not mind it being relatively recent used model and although we may change after 3-4 years, we feel we'd like the option to keep at that point and it seems much more cost-effective to have invested in ownership.

    Our options are take out a 15k bank loan after the remortgage (looks like we could get around 3.3%). Or we could add 15k to the mortgage - if we did the latter, clearly this would raise our monthly payment, but we would endeavour to overpay as well, so that at the end of this fix period, we have paid off all of the additional 15k.

    I'm just wondering what your thoughts are? Most articles on adding to mortgage for the purpose of a car do not factor in that we would overpay. Also, we're in the lucky position that it would have no impact on LTV on the mortgage. We do not have any concerns over being able to keep up with payments. We are remortgaging anyway, it just so happens to be a good time to change car also. Our broker has said there would be no problem in borrowing this additional 15k and this would still be the best mortgage option if we did so.

    Would appreciate opinions.

    Many thanks!
Page 1
    • zx81
    • By zx81 11th Aug 18, 10:26 AM
    • 19,669 Posts
    • 21,064 Thanks
    zx81
    • #2
    • 11th Aug 18, 10:26 AM
    • #2
    • 11th Aug 18, 10:26 AM
    Can you pay at least part of it from savings? How much are you currently saving per month? You could quickly rebuild savings from the amount you are saving on the loan.

    Re a loan - have you tried an eligibility checker to see what kind of rate you may get?
    • redux
    • By redux 11th Aug 18, 11:52 AM
    • 18,712 Posts
    • 25,037 Thanks
    redux
    • #3
    • 11th Aug 18, 11:52 AM
    • #3
    • 11th Aug 18, 11:52 AM
    It's not quite loan advice, but I'd rather spend less on a car.

    For 5000 vs 15000, you'd see first year depreciation of about 100 vs 300 a month.

    The difference of interest on these between 1.9 and 3.3% is much smaller than that
    • DCFC79
    • By DCFC79 11th Aug 18, 1:16 PM
    • 33,144 Posts
    • 20,869 Thanks
    DCFC79
    • #4
    • 11th Aug 18, 1:16 PM
    • #4
    • 11th Aug 18, 1:16 PM
    It's not quite loan advice, but I'd rather spend less on a car.

    For 5000 vs 15000, you'd see first year depreciation of about 100 vs 300 a month.

    The difference of interest on these between 1.9 and 3.3% is much smaller than that
    Originally posted by redux
    Here here, loads of cars available for 5k and if you buy right you can get something decent.
    • foxy-stoat
    • By foxy-stoat 13th Aug 18, 9:03 AM
    • 3,221 Posts
    • 1,821 Thanks
    foxy-stoat
    • #5
    • 13th Aug 18, 9:03 AM
    • #5
    • 13th Aug 18, 9:03 AM
    I would 100% not be using credit to buy a car and paying it over 10/15/20/25 years whatever the percentage rate.

    Get a 3 year loan MAXIMUM for the car if you mush spend 15K on one, that way when you come to sell it you will not be in a position that your still paying for something that you dont have.
    • macman
    • By macman 13th Aug 18, 3:08 PM
    • 42,794 Posts
    • 18,041 Thanks
    macman
    • #6
    • 13th Aug 18, 3:08 PM
    • #6
    • 13th Aug 18, 3:08 PM
    Unless you are intending to pay off your mortgage within the 3/4 year ownership of the car, then you are missing the main flaw in your thinking: you will be paying interest on that 15K for years after you no longer own the car. It may well be cheaper than a loan or PCP per month, but not if you look at the total cost of the loan over x years, which is the only figure that matters.
    No free lunch, and no free laptop
    • edallen41
    • By edallen41 25th Aug 18, 1:28 PM
    • 11 Posts
    • 3 Thanks
    edallen41
    • #7
    • 25th Aug 18, 1:28 PM
    • #7
    • 25th Aug 18, 1:28 PM
    Just to be clear on this, as I stated in my original post, we will overpay to completely clear the additional borrowing by the end of the fix period (5 years - actually within 3 years). So we will not be paying the additional interest for the full duration of the mortgage. Looking at it like this, the borrowing is cheaper than borrowing at 3.3% over the same time frame on an unsecured loan, right?
    • foxy-stoat
    • By foxy-stoat 28th Aug 18, 9:10 AM
    • 3,221 Posts
    • 1,821 Thanks
    foxy-stoat
    • #8
    • 28th Aug 18, 9:10 AM
    • #8
    • 28th Aug 18, 9:10 AM
    Just to be clear on this, as I stated in my original post, we will overpay to completely clear the additional borrowing by the end of the fix period (5 years - actually within 3 years). So we will not be paying the additional interest for the full duration of the mortgage. Looking at it like this, the borrowing is cheaper than borrowing at 3.3% over the same time frame on an unsecured loan, right?
    Originally posted by edallen41
    You are free to do what you want, folk on here have given their opinions.

    If your comparing a 1.89% secured borrowing loan against a 3.3% unsecured loan with the same term (3 years) then you dont need to come on here to ask which is cheaper just use an online calculator ( the difference in interest is about 450 which is insignificant in relation to the value of the car and compared to the cost of car ownership - if you really want to save money just buy a cheaper car which has been suggested), you just need to read the terms of the secured borrowing agreement for over payments and fees.

    If you have no mortgage at the moment it doesnt sound like an extra 15K secured against your home is going to be an issue - its just the unknowns that you errrr dont know - death/illness/separation/job loss.
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