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A COOL CAR, OR A HOME OF YOUR OWN?
July 8, 2019 | Posted by: Marc Crossman
Thinking of purchasing or leasing a new car?
Some quick math for you.
A $400.00 payment will reduce your total mortgage qualification by $100,000.00
I will confess that I think about new cars for at least a moment or two daily, fast cars and I go back a few decades and as I hit ‘mid-life’ temptations abound. Apparently there are 265 new car models to choose from, so many cars so little time.
I do not feel that old, but I do recall when most manufactures had three models to choose from, no mini vans, and few SUV’s. Never mind the wide variety of niches being filled with Hybrid-this and crossover-that.
Once upon a time BMW offered 3, 5 & 7 series. Today they offer 1, 2, 3, 4, 5, 6, 7, 8, i, X, Z etc…
Honda as recently as the early 90’s was three models, whatever happened to the prelude anyways?
But what does this have to do with mortgage financing?
The simple math is this;
$13,000.00 of consumer debt (credit card, line of credit)
A student loan payment of $400.00 per month
A Monthly car payment of $400.00 (Lease or Finance)
Will eliminate $100,000.00 of mortgage money from what one would otherwise qualify for.
Nice car, nice digs…tough to finance both, tougher still to finance the car before the home.
The moral of the story is this;
1. Eliminate debt from your life (and take on no new debt).
2. If you are Incorporated, be sure to have the actual payments flowing directly from your Corporate bank accounts. This will reduce the impact in most cases.
3. If you must personally Lease or Finance a new car, do so after settling into your new home and making certain that your budget can handle it.
Keep in mind that qualifying for a mortgage involves a rigorous review of your debt servicing abilities, and you are largely ‘protected from yourself’. However qualifying for a vehicle requires little more than a pulse.
You are the master of your own demise when it comes to consumer debt.
There is little to no oversight. Personally I have yet to see clients in foreclosure over a mortgage payment alone. Often is the vehicle, boat, RV, credit cards, unsecured line of credit that all came after the mortgage which are the root of the problem.
Debt is the enemy, but at least mortgage debt is attached to an appreciating asset in which you live at 50 year record low interest rates.
Although this one might sleep a family four, no?