Soon consumers can expect to breathe a sigh of relief as a new Federal program to ease the credit crunch will start taking affect in late March. With the possible new flood of loan opportunities that will become available and historically low interest rates, it may become a wonderful time to finance a purchase of a home or an auto.
When it comes to financing the initial purchases of these vehicles loans are not offered combining the two into one transaction. Mortgages are strictly for homes and auto loans are used to finance the purchase of vehicles. It is better to keep the two transactions separate entities. Experts advice that auto loans should be no longer than five years long to ensure that you do not end up under your loan. If you were to combine the two, you may end up paying off your car under the terms of your mortgage which could range from 15-30 years. Not only would the amount of interest you pay on that car loan be astronomical, but interest on car loans are not tax-deductible while mortgage interest payments are.
If, however, you are several years into both your mortgage and your car loan and get the opportunity to refinance at a substantially lower rate, you could take cash back on the mortgage and pay off your car loan. The cash back will be added towards the principal balance of your loan and increase the total debt you owe under that loan. Although you can indeed combine the debt for both an auto loan and mortgage in that capacity, you still may end up paying substantially more interest on your car then necessary and the tactic is not advised.
Car loans and mortgages are like apples and oranges. They are both fruit but feel, smell and taste entirely different from each other. In this case, you should enjoy both separately and appreciate the unique nature that each has.