Consumption and Real Estate
I have a 15yr fixed home equity loan in the amount of 50,000. I also have a car note for 27,000. ?
Question : I have a 15yr fixed home equity loan in the amount of 50,000. I also have a car note for 27,000. ?
Both accounts are at 6.99%. I have recently acquired 20,000 to put towards one of these accounts. My question is which account should I put the money towards. I was leaning towards the car note so i could keep a write off at the end of the year with the home equity loan. On the other hand, is paying the extra money in interest worth the write off at the end of the year. Very confused, Tom
fixed home equity loan
Best answer:
Answer by tkahrs12122
Pay down the car note. At least the interest on the home is deductible.
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#3 written by T J 1 year ago
I would pay down both of them ‘some’ and also save some in the ‘sock drawer’. Once you pay off the car, it’s still considered a consumable (and not worth what you paid for it ie:appreciation vs depreciation), and the interest will still be available for filing taxes, and since it’s not going to collect much interest in the bank – save it out in cash (well hidden) and do not touch it. It may be better to use the cash if the bathroom floods or the heater stops working and needs repairs than taking out another equity loan…. Another sidenote: paying off the car might allow you to carry only Liability insurance, but would you be able to replace the car if you were in an accident? Just food for thought and keeping full coverage….
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#4 written by Angie 1 year ago
I would put it against the home equity loan. Since that has the higher balance, that account you will ultimately pay the most interest on. You really don’t want to have to pay interest to someone if you don’t have to. You don’t get to write it off dollar for dollar on your taxes so it’s not going to effect you taxes that much.
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Pay down your mortgage.
1. The larger outstanding balance means more interest paid is out of your pocket. Paying down the balance means when you make future payments, the interest will be a smaller portion of each payment so you will be paying down the principle faster, too.
2. The write off isn’t all it’s cracked up to be. They are returning a portion of the interest paid, but you are still paying interest for which you receive no value.
3. The car is a depreciating asset meaning it is already worth less than you paid for it. That’s why I don’t buy new cars; I buy cars that are a year old and drive them till they drop.
4. It’s more important to keep a roof over your head; you can always ride the bus.
I would also start paying extra to accelerate pay off. We started doing that 5 years ago. Now we own our house, own our cars, have no debit and cash on hand. That’s a really good feeling under current economic conditions!