Should you Finance your Car Using your Mortgage?
Should you Finance your Car Using your Mortgage?
Posted on September 14, 2021
This question came up a week or so ago and was something we had planned to cover before, but better late than never! The question was if it's a good idea to finance your car using your mortgage.
We asked our Glen Morris auto loans team to answer this quite common question around mortgages and car loans.
Should you Finance your Car Using your Mortgage?
At first glance, borrowing a little against your home to buy a car seems cheap. Mortgage rates are much lower than auto loan rates and borrowing an extra $50,000 on a mortgage won’t increase the monthly payments all that much.
That isn’t the whole story though.
Cost over term
The one thing that quick answer doesn’t show is how much that $50,000 would cost you over the term of your mortgage.
For example, using that $50k from above, you borrow that amount using a Glen Morris auto loan at 5.5% and it will cost you $7,703 in interest over 5 years.
Borrow the same amount from your mortgage at 3.5% over 20 years and it will cost $19,595 in interest!
That’s an already expensive car made even more so if you use a mortgage to pay for it!
Financial complications
Buying a car with a mortgage also means tying your two most expensive assets together. A house and a car are the most expensive things most of us will buy.
Tying them together with the same loan isn’t a great idea. Not only will you be paying for that car for 20-30 years, the amount you borrowed will still be paid years after the car has been replaced.
Not only that, if you decide to upgrade in a few years, you’ll need to borrow more or get an auto loan to pay for it. All while still paying for that initial car within your mortgage.
That’s a messy way to run your finances!
Reduction in equity
While the Canadian economy is impressively steady right now, the past couple of years should have taught everyone that complacency has no place in modern life.
Do you really want to reduce the equity in your home to buy a car? To tie up a chunk of your financial safety blanket in a car?
Do you really want to spend an extra couple of years or spend extra per month paying a mortgage only to use it on a car at a later date?
Mortgage fees
Most Glen Morris auto loans don’t have fees, but some do. Most mortgages have fees as they are more complex and time consuming to set up.
Every time you make a change to your mortgage, refinance it, renegotiate it or something else, you may incur fees. Those can soon add up!
Mortgages may have lower rates than auto loans but they are long term loans that cost a lot of interest over the term.
We recommend using the right tool for the job and that’s an auto loan. It’s short, cost-effective and keeps your house and car separate.
Contact Unique Chrysler for help, advice and competitive Glen Morris car finance and leasing.
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