| What’s the best option for financing your automobile?
If you're financing the purchase of a car with the equity in your home, that is exactly what you could be doing — paying for a car over 10 or even 30 years.The use of home equity loans, lines of credit and cash-out refinancing to purchase an automobile grew in the last decade as interest rates dropped and property values soared.It also has become popular as lenders hyped the fact that interest on a home loan is tax-deductible, unlike on a vehicle loan.In 2006, about 24 percent of homeowners used a home equity line of credit to purchase a car or truck, according to Synergistics Research Corp., a financial services consumer market research company based in Atlanta, Ga. About 8 percent of homeowners took out a second mortgage specifically to buy a vehicle, says William H. McCracken, chief executive of Synergistics.But is buying a car or paying off your remaining auto loan balance with the borrowed equity from your home a good financial move?“I issue a note of caution on this," says Don Taylor, a columnist for Bankrate.com and an associate professor of finance at The American College in Bryn Mawr, Pa.“If you don't have the discipline to do more than the minimum payments on these loans, then this is not a good idea."The assumption people make is that the home equity loan is cheaper than a traditional car loan because of the mortgage interest tax break.However, if you don't make extra payments or pay the loan off early, you end up paying more in interest over the life of that loan than you would with an auto loan, erasing any savings on your taxes.Plus, because the car money is rolled up in a home mortgage, you could still be paying on a loan for a vehicle you've long since sold or traded in.I asked Taylor to run a few financing scenarios to compare the total cost of four types of auto borrowing: a 60-month car loan, a 10-year home equity loan, a 10-year home equity line of credit and a 30-year cash-out mortgage refinance.To view the full results or to plug in your own loan figures, income tax rate and interest rates, go to www.bankrate.com/compare.So let's look at one example of an auto loan versus a home equity loan in which you finance $30,000.
American Mortgage Acceptance Company Completes Over $113.2 Million ...
NEW YORK--(BUSINESS WIRE)--American Mortgage Acceptance Company ("AMAC" or the "Company") (AMEX:AMC) today announced the Company completed over $113.2 million of financing and investment volume in commercial mortgage loans or securities in the first quarter of 2007. "AMAC participated in several significant transactions in the first quarter of 2007, including a $32.5 million mezzanine loan for the redevelopment of Snowmass Village in Aspen, Colorado and a $10.8 million mezzanine loan for a prominent New York City office building," said J. Larry Duggins, Chief Executive Officer of AMAC. "In addition, AMAC made an approximately $10.1 million investment in the subordinate classes and equity component of a Collateralized Debt Obligation ("CDO") issued by Nomura, which was the first time AMAC invested in the CDO equity of another issuer.
Lender works to minimize losses
NEW YORK - As home foreclosures mount, mortgage companies are knocking on doors, sending letters and making phone calls with a simple message for struggling homeowners: They'd rather modify your loan than foreclose. EMC Mortgage Corp., which has a $78-billion loan portfolio that includes subprime loans to homeowners with weak credit, this week launched a 50-person team it calls "the Mod Squad." Members will spend an unlimited time on the phone with troubled borrowers, sifting through their bills to compute a workable monthly payment. In an industry that often rewards workers for getting off the phone quickly, each team member has time to speak to as few as three people a day. "You can't just run this like a call center; it needs to be run like a counseling center," said John Vella, president and CEO of EMC.
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