I never thought that using equity to pay off something was a good idea, either. However when we were getting financial counseling he pointed out that our auto loan is too high and our house has all this equity in it. He advised us that our interest rate is so low on the mortgage that we do this and then pay the payment we were paying on the auto regularly and combine it with the mortgage which is scheduled bi monthly to get the house paid off quicker. So many things about financing are based on your family situations and realize this isn’t necessarily an endorsement for everyone to do this.
However, in the financial advisors position this is a good move for us. He said just to sell the car and then put that money into the car. But if we are still paying the “SUV” payment back into the mortgage I don’t know how that works. That is why I was asking the question.
Thanks for your valuable input. It is nice to know that other people ponder these same life situation questions and we have a forum to discuss them.
Everybody I talk to says that refinancing your home and using equity that you have in it to pay off other stuff is bad. But I don’t own my home yet so I have no first hand knowledge.
I would rather have the house paid off faster than be worrying about the car. Also, note that you should be paying down your mortgage bi-monthly. Make sure the ‘new’ mortgage is set that way. At least you will repay off your house faster than if you pay once a month.
I am toying with this problem myself, as I have an Explorer Sport (two door) and now that our baby is here, it’s a pain in the ass to get in and out of. It doesn’t bother me so much, but my wife complains about it anytime we go anywhere. We still have 2 years left for the payments on it, but I think I am going to suffer it out, and if it’s that big of a deal this summer, then we’ll get a used car, something like a 4 door Grand Prix. I’d like to trade the 2 door in on a 4 door, but I’m not sure it’s worth the hassle of figuring out the loan payment and all that.
You may be better off trading the SUV in on some sort of an economical car that you are interested in. It would mean keeping payments on something, but quite likely the new(er) car would be less.
Can anyone give me any advice on this situation?
We are in the process of refinancing our home, done deal. However, we are using some of the equity we have earned to pay off the balance of our car of $10,000. Which I think is great. However, the car is an SUV and is a gas hog V8 and even when it is paid off we really would like to get rid of it, to get something more gas friendly.
We don’t really want to go and finance another car, either. But this one will be paid off.
Any suggestions from anyone out there on what they would do?