Including a car loan into a house loan...

[PinkMartini]

Let me preface this by saying I know absolutely NOTHING about buying a home/loans. I did a quick search but it couldn't find anything with my search terms, so if there's already a thread like this, can someone bump it up for me?

We're looking at purchasing a home sometime within the next few months. We have our first walk throughs scheduled this weekend.

DH is talking about seeing if we can include the remaining amount that he owes on his truck in the loan for the house (about $5k left). Our 2nd car is a mustang (already paid off - but of course I had to buy the 1 car that doesn't fit a carseat in the backseat) and we want to trade it in for a bigger car. Since we're looking at spending almost all of our savings on a down payment for the house, we thought this was a good option. It would allow us to trade my car in and only have 1 car payment.

Of course DH would need to look at the pros/cons and talk to his bank, ect but I just wanted to see what you knowledgeable ladies had to say about including cars/ect in on home loans...

[2 Crazy Pugs]

I am a mortgage underwriter, and no, you cannot roll installment debt into a purchase loan for a home. Why would you want to? You would be paying off the car over the term of the mortgage which doesn't make sense.

[PinkMartini]

Ok is it possible only for re-financing then?

Because I swear I've seen commercians for home loans that boast you can add your car loan, ect into them :confused:

[penybryn]

Don't! Cars do not appreciate. You will be paying on those cars for 30 years. Why? Its a waste of money.

[Sami]

Cars do not appreciate in value the way a house does. Keep the loans separate and pay off the car loan as fast as you can!

[pixielou]

if you are concerned about only having 1 car loan, why don't you just pay off your existing car loan, and reduce your down payment by $5k for the house? or just wait until the truck is paid off to buy a new car. maybe this just isn't the right time financially for you to be buying a new car?

i hear lots of ads on late night tv - telling people to refinance their house to pay off their car loans, credit card debts, etc. in which case, if you end up defaulting on your debt, you end up loosing your house instead of your car.

~pixie

[jajacobsen]

Many, many people rfinance an duse some of teh proceeds of tehir equity to buy a car. Many people also draw on their home equity line to purchase a car. Why? Lower rates (usually) an dteh interest on home loans is tax deductibel. On car loans it is not.

ThsiCAN be a smart strategy if properly done. It can also be a terrible decision. The deciding factor is how financially stable you are.

Pros - tax advantages, lower rates

Cons - less equity in your home, higher risk of default.

As long as you do not borrow more than you can comfortably repay, it MAY be a good answer for you. You and your DH should look into all options and talk with a mortgage broker or other trusted financial advisor. The specifics of any person's individual finances will could change the answer form bad to good.

[PinkMartini]

Many people also draw on their home equity line to purchase a car.

So it IS possible? Or is a home equity line different than what you'd get to purchase a new home? :confused: (Sorry, like I said, I'm an absolute idiot when it comes to this stuff)

The only reason we're even considering this (if it's even possible) is because with the home prices being $250k + up for a 35 year old 1300 sq ft home (absolutely ridiculous), we need to get our monthly payment down to as low as possible, which means putting in as much of a down payment as possible.

Buying a new car isn't a "MUST" right now but with our 2nd DC on their way, it would be better for us. We could wait until next year (when his truck will be paid off) to trade my car in, and we might have to. And while we could just pay off his truck and have $5k less for a down payment (which we might also do), it would eat into our down payment = higher monthly payment...

Regardless, thanks for all the replies ladies... I'll let DH know :)

[Hello Kitty]

Generally, with the commercials you see on TV, they are meant for existing mortgages. For example, you have a mortgage with a balance of $100k, and your home's market value (appraised, not quoted by realtor) is $150k. So often people will refinance - taking on a loan for $120k, 'paying off' the existing loan, which leaves $50k to do stuff with. What stuff you choose to do is a matter of opinion. Personally I would never (unless something horrible happened) choose to use my home's equity to finance non-home purchases.

I don't know how that would work for a first time home buyer because you generally take out a loan for 80% of your home's value. You may or may not finance an additional percentage through a home equity loan to make up for any down payment shortfall. Financing a home used to have looser requirements, but I think many lenders are requiring that you maintain that 80% max value.

I don't understand your reasoning for wanting to do this even if the logistics worked out, though. Are you trying to free up cash for your monthly house payment? You say you are trying to increase your down payment, but that doesn't make sense. Paying off your car loan by sending it to the home loan just increases the balance of your home loan (and therefore monthly payment). Financing $5k over 30 years will cost you an additional $6k in interest. :eek:

I would suggest to leave the car and home seperate, and once you get settled in paying your mortgage, put extra down on DH's car each month to make it go by more quickly.

[kam]

In simple terms, we all take out mortgages not only to own a house, but we're also banking on the fact that the value will appreciate. So if I get a mortgage for $250k for my house, I'm banking on the fact that in 10 years, it will be worth a lot more than that if I sell.

Now a home equity loan is essentially banking on that fact too. The problem so many people are running into is that they are given more than the equity of the house. For example, my next door neighbor owed over $200k on her mortgage and then took out a $60k home equity loan after living in her house for only a year. Then she and her husband decided to divorce. With the market as it is today, she would end up easily owing $30k if she sold right now. The original purpose of the home equity was to improve the value of your home. The fact that people don't use it for that is a HUGE risk unless you plan on staying in your home forever or you are in a market that will never decline (NYC, for example).

In your case, if you owe $5k on your car and for whatever reason you couldn't afford the payments on your current loan, you'd lose your car. If you couldn't afford the additional payments you've combined with your home, you'd lose your home. I'm not sure what the upside to your proposition would be? :confused:

[villanelle75]

If you feel you must buy a new car now and that you must buy a house that makes money so tight that you won't be able to swing a car payment and the mortgage (I'd reconsider both items IIWY), see if you can just put $5000 less on the house and use that for a new (to you) car or to pay off DH's car so you can use those monthly dollars for the car payment on your newer car.

[Secret_Squirrel]

If you aren't straddling the 20% down line that makes the difference between having to include mortgage insurance in your payment, 5K is $30 a month at 6%. I'd pull the cash out of the down and use it to pay off the truck.

You can also just make do for a while. I drove a Geo Storm when I had my first baby. Thanks to getting royally screwed with a trade right before conception, we were upside down in our loan and couldn't get rid of it. There was no possible way to fit the car seat between the door and the front seat, so I had to load my precious infant through the trunk. Got lots of interesting looks in the grocery store parking lot, but mostly people didn't notice or they just laughed right along with me.

I drove that until DS #2 was nearly born. We used a home equity loan to buy a minivan. Oh how I loved the room in that minivan! The HEL was a 10 year installment so we could be flexible with payments, but we paid it off in less than 3 years.

With current real estate market conditions, getting a home equity loan on a newish purchase might be hard. If you can go through a credit union, you should find better rates and terms, if you decide to go that route.

(I see by your sig that you have two babies coming back to back. What a physical and logistical challenge! Best wishes balancing all the needs of your family.)

[udsweetpea]

You cannot include a car loan into the purchase of a new home. You can refinance later when you have equity in your home to include the car loan.

[justHB]

Agreed with all the other comments here. And truthfully, I'm not sure you should be looking into buying a home if you can't afford to pay off $5k on a car loan anyhow. Perhaps you take care of your car situation first and THEN try to buy a house.

[Asha]

if you are using up all of your savings for the home and you are adding another car debt, you may not be approved for a loan. you have probably been pre-approved based on your current debt. if you take out another debt btwn the time of preapproval and the closing on the house, you could actually jeaopardize your home loan.

another point to consider is that you are in california, houses are not expected to appreciate as much in california as they have recently, so i would not plan on your house to appreciate in the futue to finance another car.