Scarborough Getting a Home Equity Loan to save on your Car Loans



If you have equity in your home, consider a home equity loan to increase the downpayment you make on your car. Balance off the current rates on home mortgages (or a second mortgage, if you are not at a renewal time for your first mortgage) against the rate you'd have to pay on a car loan. Home mortgages are considered well-secured and low risk by lenders, so you may save money. Keep in mind, though, that mortgages assume a long period of payments so the total interest you pay over the life could be higher than with a car loan.

This option is especially smart if you use the money you save on payments to accumulate funds to pay down your mortgage in a lump sum when it comes up for renewal.

If you are in a business or profession where your car loan is tax-deductible (well, at least the interest on the loan), keep in mind that in Canada mortgage interest is not typically tax deductible, so you should contact your accountant or tax planner to ensure such financing is properly documented, so you not only save money on interest payments but can also save appropriately on your taxes!

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