We appreciate that buying a new car is a significant investment but we’re not sure a second mortgage is the best way to afford it. While there are definite advantages to using a mortgage on an expensive purchase like a car, we think an Oakville car loan designed for the purpose is best.
We aren’t going to tell you what to do, that isn’t our style. Instead, we’ll outline the pros and cons of using a second mortgage to buy a car. Then you can make your own decision.
The pros of using a second mortgage to buy a car
There are definite advantages to using a second mortgage for a car purchase. They include:
Lower interest – Even though car loan interest rates in Oakville are at an all time low, mortgage interest rates are still lower. You could save on monthly interest by using a mortgage.
The car is yours – If you use a mortgage to buy the car, you’re a cash buyer. Your arrangement is with the mortgage company and not the dealership or car loan company.
Flexible finance – Some mortgages are flexible and will allow single overpayments, lump sum payments and regular over payments to help pay down the loan faster. Not all car loans will allow that.
Existing relationship – If you apply to your current mortgage lender for a second mortgage and you pay on time, you stand a higher chance of acceptance. That lender knows you’re a good bet and that you pay on time, making them more willing to lend.
The cons of using a second mortgage to buy a car
There are downsides to everything, including using a second mortgage to buy a car.
Mortgage is secured on your home – While still terrible, we could survive losing a car to repossession. Could you survive losing your home? It’s a reality of having another loan secured on your property.
Longer term borrowing – A second mortgage will be for between 10 to 35 years and will last a lot longer than the car. Do you still want to be paying for your new car long after it’s gone?
More interest over the term – As mortgage is calculated over the term of a loan, the longer the term, the more interest you’ll pay. Even if the rate is lower, you’re still likely to pay much more in interest over that term.
Temptation to overspend – Mortgage amounts are usually higher than the average Oakville car loan so there could be a temptation to spend more than you need to. While it may be affordable, do you really want to go that much further into debt?
As you can see, there are pros and cons to financing a car with a mortgage. While it may seem like a good idea and be affordable on a monthly basis, it will likely be more expensive over the term.
Plus, do you really want to put your family at risk by tying up your home over a car?
We would suggest not and would recommend an Oakville car loan at a great rate. Work with the experts and we can secure a competitive rate on the amount you need. All without involving your family home.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!