Use Home Loan to Buy Car ?

Matthew is refinancing his property @ 4.2%.  He will have an extra $100k.  So he is planning to buy a $100k car too.  The car loan is offering him 2.88%.

Should Matthew use his home loan to buy this car or should Matthew take the car loan ?

The answer, contradict to common comments, is actually home loan but . . .
Assumption : 7 years loan


Reason 1

If you take home loan approach, your monthly repayment is $1,376.11
If you take car loan approach, your monthly repayment is $1,430.48

You will have a better CASH FLOW 

with the home loan approach.

You pay less.

Reason 2

If you take home loan approach, you have paid a total of $115,593 after 7 years

If you take car loan approach, you have paid a total of $120,160 after 7 years

You save a total of $4,567 with the home loan approach.

So either way you analysis the comparison, it is BETTER to use the home loan to buy the car instead of getting the car loan.

WHY ?  How can this be possible ?  How can 2.88% worst than 4.2% !?!?  The answer is all in an old post.  In short, car loan rate is 1.9x equivalent to home loan rate.  So in this case, 2.88 x 1.9 = 5.4 which is higher than 4.2% ( home loan ), hence this particular car loan is not better than this particular home loan.

However . . .

1.  The home loan is NOT a 7 year loan.  Above analysis is only valid if Matthew top up $1,376 monthly repayment to his 'flexi' home loan.  Else continue paying original repayment amount would drag this extra $100k loan to 30 years, that will make home loan a losing deal.

2.  his home loan offer is actually BLR - 2.4%.  So if the BLR raise above 8% one day before the 7 years period, this may become a losing deal again in future.

The world is fair and balance, in this particular case, it is obvious scientifically better to use home loan to buy the car instead of getting another new car loan ie. a saving of 4.5k plus.  However, it does come with certain risk ie. future BLR rate and a requirement - discipline top up repayment.

other may-be-related articles . . .

Happy Birthday S.R.!!

We have had a wonderful day today. Looking forward to sharing all of today's festivities with you guys. I wanted to show the birthday girl in her party attire...

We are so lucky to have this sweet thing in our lives...

Happy Birthday S.R.!!!

Here's the meat....

From the GVREB news Release

The MLS® HPI benchmark price for all residential properties in Greater Vancouver currently sits at $670,900, up 6 per cent compared to February 2011 and an increase of 0.9 per cent compared to January 2012. The benchmark price for all residential properties in the Lower Mainland is $601,300, an increase of 5.5 per cent compared to February 2011.

Sales of detached properties on the MLS® in February 2012 reached 1,101, a decline of 21.5 per cent from the 1,402 detached sales recorded in February 2011, and a 12 per cent increase from the 983 units sold in February 2010. The benchmark price for detached properties increased 10.5 per cent from February 2011 to $1,042,900.

Sales of apartment properties reached 1,020 in February 2012, a decline of 15.4 per cent compared to the 1,206 sales in February 2011, and a decrease of 5 per cent compared to the 1,074 sales in February 2010. The benchmark price of an apartment property increased 2.8 per cent from February 2011 to $373,300.

Townhome property sales in February 2012 totalled 424, a decline of 13.3 per cent compared to the 489 sales in February 2011, and a 1.9 per cent increase from the 416 townhome properties sold in February 2010. The benchmark price of a townhome unit increased 0.7 per cent between February 2011 and 2012 to $472,800.

From FVREB:

SURREY, BC – The Fraser Valley Real Estate Board’s Multiple Listing Service® (MLS®) recorded 1,269 sales in February, an increase of 59 per cent compared to January and a 1 per cent decrease compared to the 1,279 sales during February of last year.

In terms of new listings, the Board received 2,846 in February, an increase of 3 per cent compared to January and a 6 per cent decrease compared to the 3,038 listings received last February, taking the total number of active listings to 9,037, an increase of 4 per cent compared to those available in February 2011.

As Board President Scott Olson explains, a seasonal increase in sales is typical for February; however this increase was not as robust as in years past. February’s sales finished at 4 per cent fewer than the 10‐year average for that month.

“Although our market has picked up, it’s still favouring buyers. In terms of our clients, we’re seeing more caution and deliberation when house hunting.

“This could mean using a home inspection as part of negotiations, or asking for extras to be thrown in, or the client walking away if terms are not met. The other side is that selection at certain price points is limited depending on location, so if the buyer finds the right home, they act, which is keeping prices stable.”

The MLS® HPI benchmark price of a ‘typical’ detached home in Fraser Valley in February was, $569,200, an increase of 8.3 per cent compared to $525,400 last year. The benchmark price of Fraser Valley townhouses increased by 2.0 per cent in one year, going from $305,700 in February 2011 to $311,900 in February 2012, while the benchmark price of apartments increased by 0.6 per cent going from $200,200 in February of last year to $201,500 in February 2012.

Olson adds, “We anticipate the new HST transition rules will generate more buying activity of new homes over the coming months and will have a spill‐over effect on the resale market. The majority of new homes in the Fraser Valley fall under the new $850,000 HST rebate threshold and first‐time buyers will be taking advantage of the refundable tax credit bonus of up to $10,000 available until March 31, 2013.

“These changes will improve accessibility in the Fraser Valley, a region already recognized for its affordability.”

Sneak Peaks...

As promised, I am sharing a few sneak peaks from S.R.'s birthday party.

I just finished decorating ruby red slipper cookies. I have a few finishing touches with the party decor, and then I have to start scrubbing the house.

Some of our party guests will be arriving tonight.

I can't wait to share the entire party with you all. Have a great weekend everyone!!!

words fail me............almost

New high for the average price

Actually this is not unexpected. Inventory is the highest since the 2009 crash. The MOI is over 6 and much higher in the outskirts, with condos leading the pack, sales are down a lot compared with last year- yet HAM buying has been hot and heavy in the pricey areas...so the average is up!

In fact we have had several huge sales, and not just to the Lululemon founder, but to some very rich locals and HAM, which has skewed things considerable.

Now we will have to wait for the HPI, though of course we know that the REB has fiddled with this so that this is not as reliable as it was.

Actually this result is not as bad as it would seem:

1) Higher prices will bolster the very little back-bone the Feds have to deal with their own excesses.

2) In all bubbles the periphery starts to defalte first- OK, Sunshine Coast, Fraser Valley and then we get to the centre. That's what happened in the US.

If this is the case, we would expect weakness to emerge from the FV numbers and our numbers to be weaker from here onwards.

Dr. Suess' Birthday on March 2nd....

If you guys are in need of a Dr. Seuss idea, you can check out my post from last summer where I made

 Thing 1 & Thing 2 t-shirts for the kids.

Comes with free printable & tutorial!!

Vintage Pillow Case Dress

I thought I would share a dress I made today. One of the outreach programs for our Homemakers' club this year is to make Pillow Case Dresses for the Little Dresses for Africa program.

We needed a "prototype" to show at the county board meeting, and I was asked to make one. I had this beautiful vintage pillow case just hanging in the closet, and I knew it would be great for the demo dress & perfect for my S.R.

 The needlework on the bottom of the dress is all done by hand...it's beautiful!

 Instead of tying a bow on either shoulder, I decided to go with the "less-fuss" approach, and go for the one shoulder bow.

I can't wait for S.R. to wear this dress.
She squealed when she saw it. Hopefully that same enthusiasm will be there when spring arrives;o)