Finance question for a non-finance person

[Kuyuk]

Alright, I have an ideal situation, however I don't think it would fly should I be silly enough to pass it by a banking person.

So I come to the trusted peanut gallery of the PC.


I'm currently paying ~338/month for my car @ 9.9% interest. I have 48 payments remaining.

I am very interested in buying a parcel of land for future building.

What I was thinking would be fantastic, is if I could somehow get a mortgage for about the same amount as my car payment, and roll my car debt up into the mortgage cost. I.e. take out mortgage for $68k, toss the car debt into the mortgage, and I would have 52k to spend on land. (The parcels I'm looking at are 32-38k)

Do banks do that? Or am I smoking something?

This plan was thought of during a 4.5 hour car ride by myself...


K.

[Warriorbird]

You got 9.9%?

:winces:

[Sylvan Dreams]

It's possible to get a mortgage for more than what you want to spend on the land, but most banks will require a really good reason for it - such as paying off a divorce settlement when selling a house, or to build on land, or to repair existing property.

You should also consider that you might actually end up paying more for the car, because your loan would be longer than the standard 5-year car loan which would have you paying interest on a higher balance for a longer period of time.

[Back]

Most likely your mortgage payment will have a lower percentage interest. Plus, you can write off your mortgage interest on your taxes.

Paying off your car by lumping it into your mortgage is not an uncommon practice.

[Clove]

Most likely your mortgage payment will have a lower percentage interest. Plus, you can write off your mortgage interest on your taxes.

Paying off your car by lumping it into your mortgage is not an uncommon practice.Depends on how much interest you're paying. It's only worthwhile to deduct mortgage interest if you paid more than the standard deduction. To be honest I would be surprised if a 68k mortgage (particularly at today's interest rates) would generate enough interest, even in the first year to make it a worthwhile deduction.

[Back]

Depends on how much interest you're paying. It's only worthwhile to deduct mortgage interest if you paid more than the standard deduction. To be honest I would be surprised if a 68k mortgage (particularly at today's interest rates) would generate enough interest, even in the first year to make it a worthwhile deduction.

I’ve heard that most people don’t take the mortgage (and other) interest deductions for fear of being audited. That seems strange to me because it is totally legal.

Granted, if it is less than standard, go standard.

[Kuyuk]

Yeah, I got 9.9%, was my first "big" purchase, first auto, no house, etc. and was about 2 1/2 years ago.

What is the standand deduction on house interest?

K.

[Gan]

Alright, I have an ideal situation, however I don't think it would fly should I be silly enough to pass it by a banking person.

So I come to the trusted peanut gallery of the PC.


I'm currently paying ~338/month for my car @ 9.9% interest. I have 48 payments remaining.

I am very interested in buying a parcel of land for future building.

What I was thinking would be fantastic, is if I could somehow get a mortgage for about the same amount as my car payment, and roll my car debt up into the mortgage cost. I.e. take out mortgage for $68k, toss the car debt into the mortgage, and I would have 52k to spend on land. (The parcels I'm looking at are 32-38k)

Do banks do that? Or am I smoking something?

This plan was thought of during a 4.5 hour car ride by myself...


K.

Normally lenders will only allow for a loan on undeveloped land for the amount the land is appraised for and usually for a 1 to 3 year loan, non renewable - meaning you better start construction soon.
(*this is for Texas loans, other states may have different lending practices/laws)

If you already owned land and wanted to use it as collateral on an equity line of credit, then you could possibly pay off your car note with it. However, rates for lines of credit are hovering somewhere between 7 and 9%.

If I were you, I'd join a credit union if you're not already a member, and transfer the loan to the credit union at a cheaper rate. Nothing says you have to stay with the same lender if you can find a better deal.

9.9% sounds normal for someone with a credit score in the 600's. And during these economic times a 600 range score is pretty normal from what I hear.

[Warriorbird]

I had lower with an even worse post divorce credit score.

[Clove]

I’ve heard that most people don’t take the mortgage (and other) interest deductions for fear of being audited. That seems strange to me because it is totally legal.

Granted, if it is less than standard, go standard.That's ridiculous, your bank reports the interest you paid to you and the IRS; as long as it's a legitimate mortgage interest deduction there's no reason why you should worry about generating extra scrutiny from the IRS by claiming it. It's very straight-forward.

I second Gan's advice- find yourself a better lender for your car loan.

[kgolfer]

Most banks will not give a "mortgage" loan without a building on it to begin with. If you are buying a piece of land to build on, a bank will give you a "construction" loan that will be converted into a mortgage once building is finished (most banks require building to be done within a year). If you want to buy a piece of land, and do not plan on building on it in the next year, the loan would be a "raw" land loan. Those loans are not at the mortgage loan rates....most "raw" land loans start about where your car loan is at now....9-12%. Lastly, banks are skittish right now. If your car loan is 9.9%, either you have a low FICO or you have no credit history....either of which will be hard getting any kind of loan that rolls a car auto balance into it without a ton of money down or a lot of equity in the property.

[Gan]

I had lower with an even worse post divorce credit score.

Arent you special...

[Warriorbird]

Not in particular. With his level of income, despite the current credit issues, getting that into a different loan might be a good idea.