At a glance, home loan rates are considerably lower than car loans. So why don’t we just buy a car using your mortgage?
If you are ahead of your mortgage, you may be tempted to redraw to fund that next car purchase. However you need to be aware of the positives and the negatives of doing this:
Positives:
- Convenient – by using your mortgage you only need to worry about one loan repayment.
- Quick if it involves a redraw – depending on the lender, redraw can be a matter of a simple phone call, unlike getting a loan from scratch where the broker needs to verify income and do credit s checks.
- Affordability – if you are ahead on your mortgage, this means you may not need to increase your repayments
Negatives:
- Its an expensive option – Interest rates may be lower however, the size of the debt and the effect of compound interest over time means you pay more interest therefore costing you more in the long run. Also you may get charged with redraw fees to access the funds.
- Keeping Track is difficult- by not separating out a car loan you cant make additional payments which will enable you to have full equity or paying off the car
- Could end up being time consuming if you need to refinance your mortgage in order to get the car loan – if you are not in front on our mortgage repayments and don’t have the excess funds to redraw, going through the mortgage loans process will take a lot longer than obtaining a car loan. For example, when obtaining a mortgage, your broker will need to arrange a valuation of your property. This could blow out into weeks, making the process extremely cumbersome.
If you need to know more information about obtaining a car loan instead of using your mortgage, call our friendly staff at natloans on 1300628562.
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