Current mortgage rate below 3% makes it almost free money factoring in inflation.
Risk is there is asset prices fall in value. Loan to value has two inputs.
That is definitely one way to look at it, a friend of mine who is a mortgage broker has been advising me as such even though I like not having a mortgage.
There is still some thing about having free cash flow that I can’t help but feel may be very important going forward. In the least, it is a low stress approach.
My plan, to try and capture both sides of this with minimal risk and no cost, is to get a HELOC in place. This effectively locks in nearly all of a properties current value as an available credit line. BOA is doing these for free right now, up to $500k, but their criteria is that the property must be mortgage free, or have the first mortgage with BOA currently.
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I agree housing prices will fall eventually. However the decline will not be the same all over, and the old adage “Location, location, location” will be the main determinant if and how much of a decline we will see.
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Where is this again?
My house is in the NYC suburbs - North NJ.
Just now jumped into your nightmare.
You had me at 16.5% and 605.
Aren’t there some instances where negative equity in a lease could be helpful. For instance:
- body damage
- negative equity rolled~$4-5000 (with trade-in)
- paying $15,000 over 36 mos @ 1% VS $~19000 over 36 mos (remainder of car loan) @ 8.75%?
- not interested in owning car
- looking to lease and continue leasing
Am i missing something?
One would be relinquishing whatever positive equity remains after loan payoff, but if that’s eaten up by interest and damage then does it matter?
The negative equity isn’t helping. If there wasn’t any negative equity, your lease payments would be even lower.
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I wouldn’t ever say it’s helpful, it dead weight costing you money, at best a necessary evil. Body damage shouldn’t ever apply, yes you can roll negative but if you don’t drive it to disposition to pay it all off, you are just making a bad problem worse until eventually you’re bankrupt. Your last two bullets are reasons to lease, but ideally you should always go into a new lease clean.
Is this hypothetical or is this your situation?
Because hypotheticals are mostly useless here, let’s talk real world.
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Ok, so you’re saying for whatever reason if I don’t fulfill the 36 mos lease I now added in the N.E. to that predicament
This is my situation.
I have body damage on my mazda cx-5…coming out of pocket would be roughly the same as my deductible, but im afraid that even getting it fixed it will further depriciate its value if i wanted to sell at the end of loan. I may still be upside down or just breaking even. And my current interest is 8.75 with $18,790 to go
So you’re financing and your CX-5 is damaged. Fixed or not, its resale is diminished yes.
If you are financing at 8.75%, even at 84 months, my suspicion is your credit score deserves some attention before you consider leasing. Consider refinancing your loan at a lower rate and continue to pay it down.
You own this car, it needs/will have had body work (you call to fix or not), it is what it is. Trying to get out of it now and into a lease will probably make your financial situation worse, not better.
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Ok Makes sense
My credit is good. The mazda was my first loan with baby credit history. Maybe I can get a better refinance % now.
Thank you for the advice!
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Trust me, we’ve all been there.
If you are just looking at the CX5 as “should I fix it or use the money to roll into something new”, probably not financially advantageous. If you had some other reason you felt you needed out of the CX5, maybe a different story.
If your credit is good, definitely look at refinancing at a lower rate. New car inventory is still low, lease deals are few and far between. Used cars are also in short supply which makes buyouts/trades good, but you will dinged (no pun intended) if it has has body work. You can always take it to Carmax, check Carvana and Vroom to see what the gap is between their offer and 3rd party payoff.
With very little here, my suggestion would be to refi at a lower rate, get it fixed (and maybe detailed so it feels new: less than tags/title/tax on a new one) and keep checking back. It’s possible in Dec/Jan we’ll have more inventory and deals, but now isn’t a good time to change cars unless you absolutely have to.
Good luck!
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Have you gotten quotes on what the Mazda is worth? People have been reporting the carvana and others are not dropping their offers significantly for damage.
Yes I got $13,000 from carmax and the highest trade-in is from a local dealership for 1300 higher . So that leaves me around $4000 n.e…not as bad, but still considering.
Haven’t tried carvana yet.
Thank you! You’ve been really helpful.
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That’s a no-brainer IMO… fix it out of pocket
Then see who among the crazy startups like Carvana, Vroom, Shift etc will give you the highest
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