Let me break down how car loans impact mortgages. There are good reasons not to get a car loan, or to keep payments small!
I just bought a car—a 2009 Honda Fit complete with hail damage and rust. It’s got the best anti-theft device ever because it’s a five-speed manual, and I picked it up for the sweet price of $1. It’s actually going to be my son’s car, but I wanted to talk about cars and more specifically car loans.
One of the biggest impediments to qualifying for a mortgage is car loans. I see it all the time where there are large payments for vehicles, and it has a direct impact on how much a person qualifies for. In fact, I was calculating one file this week where a $640 a month payment worked out to a $60-$70,000 reduction in the purchase price for the people who want to buy a home.
The takeaway is, if you need to buy a vehicle, less is more. Ideally, you can buy something for cash. If you have to finance it, the lower the payment the better. The problem is that probably means it’s a longer loan, so you pay more in interest over the long run. So be careful about that.
The last tip is to make sure that you do the math when you’re talking to the dealership. They’ll say, “Hey, what do you want your payment to be?” And you’ll say, “I don’t know. Maybe $300 every two weeks, since that’s 600 bucks.” But it’s not, if you do the math. It’s more than $600. Seriously, calculate it out and you’ll realize your payments are higher.
I also have a helpful video about whether to get a mortgage or a car loan first.
About Jason Scott, Edmonton Mortgage Broker
Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’ll be your trusted partner who will help you get the right mortgage for your family home or Investment property. I’m Jason Scott, and I’ll be your Mortgage Broker Edmonton.