Home Equity Line Use

[musclemom1234]

Has anyone used their home equity line to buy a car before?

Our mortgage is paid off, but we don't have funds to purchase a needed car right now.

[myrdale]

Has anyone used their home equity line to buy a car before?

Our mortgage is paid off, but we don't have funds to purchase a needed car right now.

Welcome to Saving Advice musclemom1234!

I would strongly recommend you NOT peruse this method of purchasing the car.

If you go through the normal process of applying for an auto loan through the dealership, or your local bank / credit union and for some reason you fail to make your payments, all they do is repo the car. Using your scenario, instead of repo'ing the car, they foreclose on your house. What you're suggesting puts your home on the line for your car.

In my opinion the only time you should borrow against your house is when it is a necessary repair on the house itself (roof, septic, electrical, etc.).

Are you having problems acquiring a car loan?

[Fishindude77]

We did that a couple times rather than getting a car loan. Always paid it off pretty quick, much quicker than the duration of a typical car loan.
In hindsight, it wasn't the smartest thing. Should have just bought cheaper cars or saved till we could afford what we bought.

[kork13]

Agreed with the others, best not to play with fire. Not saying that you WOULD have a problem (having a paid off house certainly speaks to having some good financial sense), but it's just a risk that I would definitely avoid. Generally, I would only say that a HEL/HELOC should only be used if (1) you can't otherwise pay for necessary repairs; or (2) the money is used to increase/preserve the value of the home (through renovation or repair).

Another consideration is that the HEL probably has a variable interest rate, and in today's environment, that smells like bad news to me -- the Fed continues to advertise an expectation of increasing interest rates over the next year or two.

Having a standing HELOC on tap is certainly convenient, but I've never seen the appeal otherwise. It costs you annual fees to keep active, and the terms/interest rates generally leave something to be desired.

[Jluke]

Get financing through the manufacturer.

not knowing the backstory but maybe this is an example where paying off the mortgage was not the right move…

[bjl584]

I did it once, but I paid it off pretty quickly, and rates were low and not in danger of rising at the time.
And, it wasn't for a car. It was for a piece of real estate.

Now is not the best time to leverage your home with a variable rate loan. Especially for a depreciating asset.

[rennigade]

I'll never use my house as collateral for anything.

[ua_guy]

Ditto. I'd exhaust every other option first before securing my car with my house!