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Refinancing, good/bad idea to take out equity for car

Discussion in 'Stocks & Investments' started by JaSkynyrd, Oct 3, 2012.

  1. Oct 3, 2012 at 12:21 PM

    JaSkynyrd [OP] Ron F. Swanson

    May 26, 2011
    Chattanooga, TN
    2001 XtraCab 4x4 V6 SR5
    I'm already refinancing in order to go from a 4.5% 30 year FHA to a 15 year Conventional (payment goes up by $135 but no more mortgage insurance and saving $118k in interest) with a 3.1% rate.

    My wife's car is a 1998 Qx4 with 150k miles on in and has some issues that we are living with now but if fixed could cost $1500-$2000

    How crazy is it to take out $10k to buy her something new (to her)? We've got $4k in cash to help out and then whatever we get for her car.
  2. Nov 13, 2012 at 10:44 AM
    Evil Monkey

    Evil Monkey There's an evil monkey in my truck

    Aug 8, 2007
    First Name:
    Escondido, CA
    07 4x4 DC SR5 TRD Off-road
    Weathertech front & rear mats, rear suspension TSB, Toytec AAL for TSB, Hi-Lift Jack, Bilstein 5100 & Toytec Adjustable coilovers, Built Right UCAs, KMC XD 795 Hoss Wheels, Definity Dakota MTs 285/75R16, Leer XR, Thule Tracker II & Thule MOAB basket
    Assuming you could get a car loan for 8% for 5 years, you'd pay less interest with the car loan than you would on a 3.1% home loan for 15 years ($2100 for the car loan, $2500 for the home loan). Even though your loan is a much lower interest rate, you're paying it out over a longer time so more interest accrues. Plus, if you get rid of the car before 15 years, you're still paying on it.

    The only advantage is you would be able to deduct the interest and the payment would be less. After deducting it could be about $1500 vs $2500. If you could get a loan for 6%, it would break even despite the write-off. It depends on your tax bracket as to how much you'd save. My guestimate is based on a high bracket of 35%.
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