increase mortgage to buy dream car?

[CS Garth]

It all depends on timing. If house prices fall, the equity in your home reduces, and you say also happen to come off a fixed rate deal, will you be forced onto a higher rate for your mortgage if you couldn't sell your car to increase the equity (whose value may have fallen).

Personally I don't think you can answer this without stress testing your finances to various financial outcomes. And right now that feels more appropriate than ever.

[SuperVM]

In the last few years it could have worked well, there are plenty of cars that have appreciated in that time, combined with increasing house prices; however, I think the used/classic car market is about to collapse, combined with a not insignificant drop in house prices. For me, it wouldn't be worth investigating until the situation with the EU becomes a bit clearer.

[docter fox]

If you're borrowing 50k and paying it back over 5 years it'll cost you less than 5k, if you just add it to a 25 year mortgage it'd probably cost you 80k. The first seems plausible, the latter seems crazy to me.

[J4CKO]

docter fox said:

If you're borrowing 50k and paying it back over 5 years it'll cost you less than 5k, if you just add it to a 25 year mortgage it'd probably cost you 80k. The first seems plausible, the latter seems crazy to me.

yeah, I agree, but sometimes I could see it working, for example if you know in 18 months you are due a windfall and can pay it back in, or with hindsight the classics that have gone up would have been a really good move

Worst case is borrowing say an extra 30 grand on a run of the mill, but nice car and add it to an interest only mortgage you are two years into, you then get to pay interest on that money for 23 years and then pay back the full 30 grand at the end of the term and not have 30 grands worth of extra house investment that has risen in value either.

Its a bit like the girl at work that had a £50 a month phone contract, rather than reduce to a cheaper tariff (£15 ?) when her Iphone 5 was paid for after 2 years, she took the upgrade and then sold the phone for £300, so sold a £600 phone for half price and had to pay an Extra £10 a month line rental for 2 years, that decision cost her £540 or thereabouts, scale that up to a car sized purchase.



Short termism in finance is a dangerous game to play, and one that human nature and lenders are only too happy to enslave us in for ever if we volunterr for it in the name of shiny trinkets or just forced into it due to not having any money.

Edited by J4CKO on Wednesday 29th June 15:07

[Rick101]

Borrowed some money on a personal loan to buy a car earlier this month. Spoke to my bank manager and he advised just use of of the numerous online lenders.

He was right, very very simple application to Nationwide, instant response and money in account the next day!. borrowed about 15K I think and I'm sure it was only around 3.4%.

Didn't need it in the end so paid it back within the cancellation term but was surprised how easy it was.

[VladD]

Before we bought our current house, I was tempted to buy a cheaper house and use the mortgage to finance a Gallardo. I would have been OK as they're appreciating rather than depreciating, but I got spooked by the running costs and bottled it. I still don't know if I made the right choice.

[SAWUK]

I recently took out an offset mortgage against a house to help fund a temporary cash flow issue in my business. This money was not required in the end so what's a man meant to do except use some surplus to fund a 458 Italia - which incidentally was collected last Thursday in time for Goodwood FOS

The way I see it, is that most cars are financed and the cost of doing this is much higher than the rate I have. I am happy to take the hit on its depreciation (hopefully not too much) and the running costs - RFL £515, Insurance £600, Tracker £300 and fuel are minimal.

I discussed this with the bank manager and he thought it was a very cost effective way of funding such a purchase - he even arranged the CHAPs transfer FOC.

Please note though, I run successful business and could pay the offset amount back if I wished. Anyone who is thinking of doing this should carefully look at their finances and at the very least be able to pay the amount back taking into account the vehicle depreciation. Please do not put your (or your family's) home at risk!

So, there you go, real world actual man maths!

[J4CKO]

SAWUK said:

I recently took out an offset mortgage against a house to help fund a temporary cash flow issue in my business. This money was not required in the end so what's a man meant to do except use some surplus to fund a 458 Italia - which incidentally was collected last Thursday in time for Goodwood FOS

The way I see it, is that most cars are financed and the cost of doing this is much higher than the rate I have. I am happy to take the hit on its depreciation (hopefully not too much) and the running costs - RFL £515, Insurance £600, Tracker £300 and fuel are minimal.

I discussed this with the bank manager and he thought it was a very cost effective way of funding such a purchase - he even arranged the CHAPs transfer FOC.

Please note though, I run successful business and could pay the offset amount back if I wished. Anyone who is thinking of doing this should carefully look at their finances and at the very least be able to pay the amount back taking into account the vehicle depreciation. Please do not put your (or your family's) home at risk!

So, there you go, real world actual man maths!

Has cash flow issue, so buys Ferrari

Sir, I salute you for making that sound like the only sensible thing to do, enjoy !

[SAWUK]

J4CKO said:

Has cash flow issue, so buys Ferrari

Sir, I salute you for making that sound like the only sensible thing to do, enjoy !

Why thanks, so far no regrets the motor is all I could expect!

I appreciate my earlier comment re cash flow could be taken as being flippant, however it was not an issue with company trading but with a partner requiring cash from the company, hence I prepared for this with a personal mortgage (I had his back). I would not of used this money for a car if the company was at risk of being suffocated with too little cash - that's as bad as risking your home!

I hope this is a good insight to how I did it.

[Orange Rocket]

Surely this depends where you are in your mortgage, are you at a fraction of the value to pay back or are you a new home owner? Would the additional borrowing affect the LTV value and therefore your interest rate? I would have assumed that the lender wouldn't give two hoots what you spent the money on (drugs and hookers may be an exception to this, maybe) if your equity in the house covered the loan amount, house and car combined.

Surely the question here is can you afford to run the car comfortably? It's no good having a low cost mortgage loan if you're scraping the pennies together for fuel, servicing and any unforeseen repairs and consumables?

The basic tenet states that if you have to ask then you can't afford it; I would suggest that if you are asking this question then you like the idea but don't want to risk it...

[loudlashadjuster]

Interesting thread. I have £100k sitting around doing not very much right now while we sort out plans, BC etc. for an extension which realistically won't be starting until late 2016 or early 2017.

Instead of trying to scrabble around and putting bits of it into various accounts which pay meagre interest, what I should be doing is buy a 911/355/etc. with the best provenance, run it for 6 months then sell for a profit?

I wonder if the wife'll go for it

[shake n bake]

Can I take I guess and say audamars has posted on this topic about six figs and his property portfolio?

[goevenfaster]

loudlashadjuster said:

Interesting thread. I have £100k sitting around doing not very much right now while we sort out plans, BC etc. for an extension which realistically won't be starting until late 2016 or early 2017.

Instead of trying to scrabble around and putting bits of it into various accounts which pay meagre interest, what I should be doing is buy a 911/355/etc. with the best provenance, run it for 6 months then sell for a profit?

I wonder if the wife'll go for it

Me too....I thought I should buy 991 gt3.....apparently not. Impossible sir....although we do have one with delivery miles for an inflated price!

[AyBee]

Setting aside the problem of house price fluctuation and whether it's right or wrong, I think the biggest problem I'd have would be selling it 12 months down the line and repaying the mortgage. I'd want to be able to experience my dream car and move onto something else similar, not experience a V10/V12 for 12 months and then get back into a bog standard diesel euro hatch.

[adingley84]

The only responsible thing to do in this situation is to post this link to Money Supermarket mortgage calculation site... http://www.moneysupermarket.com/mortgages/calculat...

[red_slr]

loudlashadjuster said:

Interesting thread. I have £100k sitting around doing not very much right now while we sort out plans, BC etc. for an extension which realistically won't be starting until late 2016 or early 2017.

Instead of trying to scrabble around and putting bits of it into various accounts which pay meagre interest, what I should be doing is buy a 911/355/etc. with the best provenance, run it for 6 months then sell for a profit?

I wonder if the wife'll go for it

12-18 months ago yes 100%!! Nice 355s were £50-£60k. Very few under £100k now.

[adingley84]

Well ive followed my own advice and done some mortgage maths...taking advantage of new lower fixed rate mortgages, I could borrow an additional £19.5k over the same remaining term and pay £3 LESS per month. (Calculations include the £1000 setup fee which I'd add onto the mortgage.

So my choices are:
1. £20k 'free money' to buy a fitting replacement for the Forester XT when the time comes
2. Buy a banger with the trade in value of the Fox + some cash

I genuinely can't see a downside to option 1. (I stand to be corrected obviously)

[The Moose]

adingley84 said:

Well ive followed my own advice and done some mortgage maths...taking advantage of new lower fixed rate mortgages, I could borrow an additional £19.5k over the same remaining term and pay £3 LESS per month. (Calculations include the £1000 setup fee which I'd add onto the mortgage.

So my choices are:
1. £20k 'free money' to buy a fitting replacement for the Forester XT when the time comes
2. Buy a banger with the trade in value of the Fox + some cash

I genuinely can't see a downside to option 1. (I stand to be corrected obviously)

If you didn't increase your borrowings, how much would the monthly amount reduce, or more importantly if you were to keep the payments the same, how much sooner would you be able to pay off your mortgage?

That's the downside.

[Mr Tidy]

I really shouldn't have read this thread!

I have one of those "flexible" mortgages (Virgin One) that is currently in credit - borrowing at less than 4% APR is quite an attractive proposition just to try something really special for maybe a year or so!

I hope I have forgotten this thought before I wake up tomorrow and start browsing classifieds!

[Ilovejapcrap]

I'm going to sound like an old stick in the mud but.

Is this not the sort of thing that ended with loads of people in debt and can't pay well take it away type carry on.

Sorry to seem down on it, I'm a glass is half empty kind of guy