A&Q about Lotus
Q:
OK so you think an 8% HELOC that I can write off the interest is a better way to go than a 4% (half the heloc) fixed on a credit card even if I make payments to the credit card as though it was an actual car payment ($500-$600) a month?
I am a VERY good debt manager and other than my home loans, I really have no debt either and my current car (which I am keeping) is paid off.
Thanks for all the info guys!
A:
Originally Posted by Crow331
I live in the Hollywood Hills in L.A., the only way I am going to lose half a million in equity is a brush fire or California falling off into the Pacific.
Now I dont know what youre home is worth but in the early 90's, home prices did decrease in SoCal by 40-50%...not saying it will, but it can happen again for several reasons.
1. the housing mkt has risen ALOT over the past decade(but esp past 5 yrs) and no mkt can continually go up at this rate/velocity.
2. interest rates are going up...this will cool off the real estate mkt...when/if lending rates go up to 8-9, i think panic will set in to some degree...jmho.
3. 40-60% of loans over past 3-5 yrs were either ARMS and interest only's in an environment that posted the lowest mortgage rates in the past 40yrs...that tells you something...I know people making 70K a yr buying homes worth 600K cause they dont think the real estate mkt will ever go down.
4. majority of ARMS will adjust soon...peak will be 07-08' and many people who could barely afford payments with low rates will have to sell
5. inventories are already at 6-7 months nationally ...they were 2-3 months just 6 months ago...in MA, forclosures are up 70% in Aug 06' when compared to same month last yr!...prices are already coming down in "hot" mkts...prices are somewhat more resistent in thw west but that is due to sellers being stubborn more than anythign...but prices will come down here too...just a matter fo time.
6. 15% of buyers last yr were speculators that never even lived in the properties they purchased..these people are fleeing as we speak...15% of buyers lat yr were second homes ...these people wont be buying much anymore in down mkt due the psychological related issues even when prices drop due to rates or physchology as mentioned above.
7. the housing mkt over past few yrs feels exactly like the internet boom 6 yrs ago...you know youre at a mkt top when its in headlines weekly...now you are seeing it in the headlines in a negative way and the herd mentality will overshoot on the downside just like it did pn the upside.
8. when you see greed and inexperienced people getting in the mkt, it also signals a mkt top.
These are JMHO of course...as for me, I just wait and will be ready to buy/invest when the mkt looks hopeless and oversold...when its in the headlines on a weekly basis how hopeless and terrible the housing mkt is, thats when I buy again.
A:
Only pay with the HELOC if you intend to transfer the balance to a 0% or low APR credit card. You can get 5.74% car loan (3yrs or 6.10% for 5 yrs) through CostCo for dealer purchase and 8% HELOC with 25% income tax bracket makes for a net 6% variable interest rate.
HELOC with CC balance transfer would give you minimal interest at the cost of lower FICO for loan duration.
A:
I took the HELOC route... interest is deductible. I already had the line of credit for some landscaping I had done a year earlier... 5 year draw period with 10 year payoff period after that. It is an ARM that started at 5% and is now up to 8%. I used the HELOC rather than cash in stock options and sell other stock. Despite the rising interest rates it turned out to be a serendipitous decision... my company is being bought out and that stock just doubled in value since I made my purchase in January
I plan to pay the loan down to near zero... if necessary to hold onto the credit.
You may be able to take advantage of the sales tax vs. state income tax deduction on your federal taxes. The sales tax I paid on the car alone was more than I paid on AZ taxes last year so I'll benefit by keeping misc. receipts for the sales tax deduction.... your mileage may vary and it may still be an option in future years.
A:
Originally Posted by FlyLo
I would use the credit card option.
In the unlikely event that they monkey with the rate, you can move the balance to another card.
That'll kill your credit rating.
ed
A:
This is what I do for a living....mortgage/auto lending. From your questions it sounds like you can't afford the payments on a normal auto loan? Unless your tax situation is complex I'm guessing you wont see the "tax benefit"...so why arent you just doing a normal auto loan for 5 or 6 years at 5.25% like I did a month ago?
A:
Originally Posted by mchristian
This is what I do for a living....mortgage/auto lending. From your questions it sounds like you can't afford the payments on a normal auto loan? Unless your tax situation is complex I'm guessing you wont see the "tax benefit"...so why arent you just doing a normal auto loan for 5 or 6 years at 5.25% like I did a month ago?
I can afford the payments on a normal autoloan, I'm just trying to figure out if that's the best way to go. Why pay an autoloan where I get no tax deduction if I can put it on a heloc with a tax deduction? Or why pay 6 or 7% on an autoloan if I can put it on my credit card for 4%. No matter what way I go, I will be making payments similar to what it would cost me on an autoloan ($500-$700 a month is what I can probably afford). I wasn't sure which way gave me the better savings, money wise.
All I'm trying to figure out is what method of paying is going to make the car cost the least amount of money over a 5 year period?
A:
Just remember HELOC's are Tied to PRIME (as are CC's). Prime is on it's way down (most analysts think so) starting in Jan 07. They should remain constant until then, so this would mean you would pay even LESS starting in Jan.
I would say since HELOC's Are tax deductible AND IF you are already itemizing then this would be the way to go.
Can you get a fixed rate second loan on the house? I am sure you CAN if you have that much equity in the home. Hell I am a broker and I KNOW I can get you a fixed rate second if your credit score is in line.
I would say take the HELOC if you are worried and you can always pay it off with a 0% apr CC if you really wanted to, but remember they are interest only usually for 15 years so make sure you pay it off. With Prime about to start the slow decline downward you should be better off that way.
IF you have trouble getting something or want more information you can always PM me and I can get you some quotes. I do loans in AZ and Cali and for my elisetalk buddies I will get you the best rate I can.
Ryan