Need monetary advice

[fLum0x]

So, I am almost 25, married and both of us have a pretty stable job. We are looking to buy our first house. Our goal is to put 20% down on a ~150,000 house. We are slowly making our way, but we are about 3/4 of the way there. We both own our cars and we have zero debt. Both of us are also putting 10-15% into 401k. We currently have our money in MMA's and CDs at 5%. That is just the background.

Now, both of our cars are old and will need replaced in the next 1-3 years if i had to guess. I am driving my car until the wheels fall off and then she will get a new car and i will drive hers until the wheels fall off

We are looking to purchase this home in the next year, hopefully 3rd or 4th quarter of this year. Someone at work today was telling me that if you can put that much down on a house and get instant equity, you could get a 2nd loan for a car when you need it and write both, the car and house, interest off. Is this true?

If you were us, would you put as much as you can down on the house (up to 20%) and then buy a car or would you buy the car outright and only have about 10% to put down on the house?

Thanks in advance.

 

[FoBoT]

some cars are available with 0% financing, if you are considering any of the models that qualify, then you could stick with the 20% down payment on the house

 

[SunnyD]

Give you cash to me, I'll make it work for you.

 

[maddogchen]

what is the price range of the car you are looking at?

 

[Drako]

Put the 20% down on the house.

Keep the cars as long as reasonably possible, and get a quality used car.

 

[Kyteland]

Originally posted by: maddogchen
what is the price range of the car you are looking at?

Sounds like $15,000 if their options are 20% of $150,000 or car+10%.

 

[fLum0x]

Originally posted by: Kyteland

Originally posted by: maddogchen
what is the price range of the car you are looking at?

Sounds like $15,000 if their options are 20% of $150,000 or car+10%.

Yeah. 10-15k for a nice used car. Just need something that goes from point A to point B.

 

[fLum0x]

Originally posted by: FoBoT
some cars are available with 0% financing, if you are considering any of the models that qualify, then you could stick with the 20% down payment on the house

I understand, i was planning on doing that. However, i was told that i could write off the interest on the car and the house. Zero financing will only get me so far (12-24 months?)

 

[hellokeith]

Start a car savings account. Both of you put xxx % into it each month. Use it for any car-related maintenance/upkeep/inspection/registration/etc. This way, if your current cars keep going, you'll have a nice additional savings nestegg, and if you do have trouble you won't be hit with unexpected breakdown/new car expense if/when that happens. Save up enough in auto savings account to where you feel comfortable also making your 20% house down payment without worry.

 

[fLum0x]

Originally posted by: hellokeith
Start a car savings account. Both of you put xxx % into it each month. Use it for any car-related maintenance/upkeep/inspection/registration/etc. This way, if your current cars keep going, you'll have a nice additional savings nestegg, and if you do have trouble you won't be hit with unexpected breakdown/new car expense if/when that happens. Save up enough in auto savings account to where you feel comfortable also making your 20% house down payment without worry.

That would take me quite some time to save up 30k+ for a house and 10k+ for a car. Right now we have it as one lump sum and we get some nice interest on it being more than 10k in the bank.

 

[kranky]

You have to factor in a couple things. A down payment of less than 20% will mean you will have to pay for mortgage insurance. And you may get a cheaper mortgage rate if you put 20% down instead of 10%. Also, if you do put down 20% and turn around to get a home equity loan or line of credit, while you can deduct the interest if you itemize deductions, it might be more expensive than what car financing will be.

So there are a lot of factors to consider. If it was me, I would put the 20% down on the house. I can't say whether that is guaranteed to be the right financial move because of the other factors involved, but I think it is more likely to be the better choice.

In either case, make sure you do not wipe out your entire savings to buy the house. Stuff will happen and you'll be glad you have some cushion.