Car loan and mortgage?

B

Bren

Guest
We have no mortage at present but will be doing some house renovation so need to take one out to pay for that. We also are about to buy a new car.

I'm wondering should we get a car loan seperately and pay it off ASAP or should we include the amount we need for the car in the mortage amount since the interest rate on the mortgage will be lower than on the car loan. Many thanks for any words of wisdom you can offer!
 
You should always borrow at the lowest cost to you. The cost of a loan is a function of both the interest rate and the term. Mortgage borrowing is usually the cheapest form of borrowing in terms of interest rates but the term is usually longer. Therefore you should get a larger mortgage to cover the cost of the car, but pay off the 'car' part of it in a much shorter timeframe. Figure out what the seperate car loan and mortgage would cost monthly, then pay this amount off monthly on the mortgage with car loan included.
 
Loan

Thanks thats interesting. We do not need to get the mortgage for about 5 months as building will not start till then but we need the car loan right away. Do you know if we can get a mortgage in stages and if they'll allow us to get it to cover the car loan as well as the house work?
 
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Saw an interesting program on TV last night with Suze Orman .. some American 'guru' giving financial advice to the masses.. well one thing she mentioned was secured debt vs unsecured debt - so moving credit card debt over onto a mortgage and she also talked about grouping different loans together on your house .. Interesting view in that if something really bad happens and you can't pay your credit card debt it's a lot more difficult for lenders to recoup but if you start default on mortgage payments the mortgage institutions can foreclose with a lot less effort.. Not sure how well that tallies up with what would happen in Ireland but I thought it was an interesting perspective in that the 'cheapest' way to borrow money may not always be the way to go .
 
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> it was an interesting perspective in that the 'cheapest' way to borrow money may not always be the way to go .

Consolidating loans onto a secured loan such as a mortgage should generally be done only as a last resort and as a once off measure to allow one to restructure one's finances/debts and get out of a hole. It definitely should not be done to allow more debt to be run up and the whole vicious cycle to start again. Also, ideally short term loans that are consolidate in this way should be paid off in or around the original term and not spread over the full term of the mortgage. In my view the main point is to avoid onerous debt but if it happens then deal with it ASAP and learn from the mistakes that lead to it.
 
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