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Adding a car to your mortgage.

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Many home owners believe that using their home equity to purchase a new car is a great solution because they don’t have to apply for a car loan and their mortgage repayments often stay the same.

It’s easy to think paying for your new car with a mortgage top up is cheaper than other car finance options, with home loan interest rates the lowest we’ve seen in years – there are a few things to consider before you make that call.

The difference – Home loan vs car loan explained

If your new car costs $30,000 and added to the mortgage at 4.99% over a 30 year term. When you take into account compound interest over the term as opposed to the longest car loan term of 5 years, it can increase your total payments to over $29,000, even though the interest rate is a lot lower.

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You pay more over the term of your mortgage

Two reasons and things to consider

A car is not an appreciatingasset unlike your property, so you will never get the value back. The loan term really mattersand banks want you to be in debt longer.

Length: Extended terms means extended payments, you’ll be in debt longer
Rate: Low interest rates are usually promotional and rates can increase
Repayments: Lower repayments almost certainly means you’ll pay more

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