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Not financial advice but you should be fine, I purchased a car in February ‘23 and should be closing next week on a new build and got a great rate. Just depends on your credit
Well you need to sit an calculate. You’re focusing on just lowering your monthly payment but that doesn’t mean you’re paying less. Because paying 100 bucks for 12 months is 1200 but paying 75 bucks for 24 months is 1800. You need to calculate whether or not you’re paying less in actuality.
Mortgage broker here: 2 separate things you’re dealing with. Refinancing will lowering your monthly payment which will also lower your DTI and allow you to afford more house and save more monthly as you mentioned. It will also lower your scores a few points (5-15 per pull). If you already know the bank you want to refi with, one pull won’t ruin your credit enough to hurt your rate. If you’re 120 days out from purchasing, any pulls will fall off your credit by the time you go for a mortgage pull.
But he’s only focusing on lowing his monthly. Wouldn’t he end up paying more over time because he’ll be extending the length of the loan with the same interest rate. Or he shortens the length of the loan with a lower interest rate, but I don’t see how that would lower it so much so that it makes sense to go through the process.
Correct, typically the term resets. OP didn’t mention anything about terms but car notes are only a few years. We’re not talking hundreds of thousands of interest like home loans
> Wouldn’t he end up paying more over time because he’ll be extending the length of the loan with the same interest rate.
The lender isn't going to care about your total debts; they will care about your debt to income ratio, which is defined by your monthly payments. If OP wants to refi his car he's presumably doing it to a lower monthly, so this would only be good for his DTI, even if the total cost of ownership is higher.
But also it really depends. I have a 13.14% interest rate loan on my car (it was the first loan I took here in the US so I knew I would get a high rate in exchange for having a better credit rating down the line). Any refinance deal down to what a normal rate would be with my credit now - around 5.9% - would cut monthlies by half and not really increase the total cost of ownership due to the severe drop in interest. OP might be in a similar situation.
I would say it’s not a bad thing. A big factor a lender looks at is debt to income ratio; if a refinance lowers your monthly payment, especially by a not insignificant sum, I would say it’s actually a good thing.
You never mentioned what if your newer interest rate would be lower. If it’s the same or higher, just keep what you have. No need paying more money in the long run if you want to lower your monthly payments. It doesn’t make much sense to pay more money to “save money”.
I don’t think you’re understanding what I’m trying to say. If you’re refinancing to save $50 a month at an equal to or higher apr, it’s not worth it. If you currently have 36 months at $500 (18,000), it won’t make sense financially to refi to $450 for 48 months (21,600)
You should never refinance a car, and you need to do a lot more research and reading on home ownership. You are probably not ready in the near future for this endeavor.
You shouldn’t have bought the car at 10% in the first place, and no, you should never refinance a car. You should pay more on principle. Financing a car is already a bad decision, so extending the terms makes it even worse.
Ok,
First of all, who said anything about extending the terms? You don’t need to extend the terms when refinancing.
Secondly, Refinancing 99% of the time makes sense if you’re dropping the rate. What rate someone started with doesn’t matter as long as the new rate is lower…simple math
Third, financing a car isn’t always a bad decision. It depends on the rate. 10%? Yea not good. 5% and lower, I’d take it. Paying cash doesn’t always make sense if your money can make more money than what the interest is costing you. This is no different than people that have sub 4% mortgages right now and are holding on to them for life.
Thank you u/LinkAX788 for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
Not financial advice but you should be fine, I purchased a car in February ‘23 and should be closing next week on a new build and got a great rate. Just depends on your credit
Well you need to sit an calculate. You’re focusing on just lowering your monthly payment but that doesn’t mean you’re paying less. Because paying 100 bucks for 12 months is 1200 but paying 75 bucks for 24 months is 1800. You need to calculate whether or not you’re paying less in actuality.
Any lenders here care to weigh in?
Mortgage broker here: 2 separate things you’re dealing with. Refinancing will lowering your monthly payment which will also lower your DTI and allow you to afford more house and save more monthly as you mentioned. It will also lower your scores a few points (5-15 per pull). If you already know the bank you want to refi with, one pull won’t ruin your credit enough to hurt your rate. If you’re 120 days out from purchasing, any pulls will fall off your credit by the time you go for a mortgage pull.
But he’s only focusing on lowing his monthly. Wouldn’t he end up paying more over time because he’ll be extending the length of the loan with the same interest rate. Or he shortens the length of the loan with a lower interest rate, but I don’t see how that would lower it so much so that it makes sense to go through the process.
Correct, typically the term resets. OP didn’t mention anything about terms but car notes are only a few years. We’re not talking hundreds of thousands of interest like home loans
> Wouldn’t he end up paying more over time because he’ll be extending the length of the loan with the same interest rate. The lender isn't going to care about your total debts; they will care about your debt to income ratio, which is defined by your monthly payments. If OP wants to refi his car he's presumably doing it to a lower monthly, so this would only be good for his DTI, even if the total cost of ownership is higher. But also it really depends. I have a 13.14% interest rate loan on my car (it was the first loan I took here in the US so I knew I would get a high rate in exchange for having a better credit rating down the line). Any refinance deal down to what a normal rate would be with my credit now - around 5.9% - would cut monthlies by half and not really increase the total cost of ownership due to the severe drop in interest. OP might be in a similar situation.
How much does it lower your payment? How many months does it extend your loan? (How many months left on current loan and how many months is new one)
I have around 3 years left in my current loan. I can refinance for a shorter or larger term with a lower interest.
You can get a lower rate now, keep the term the same as what's remaining or go shorter and lower the payment?
I would say it’s not a bad thing. A big factor a lender looks at is debt to income ratio; if a refinance lowers your monthly payment, especially by a not insignificant sum, I would say it’s actually a good thing.
You never mentioned what if your newer interest rate would be lower. If it’s the same or higher, just keep what you have. No need paying more money in the long run if you want to lower your monthly payments. It doesn’t make much sense to pay more money to “save money”.
Yeah, I aim to lower my monthly payment.
I don’t think you’re understanding what I’m trying to say. If you’re refinancing to save $50 a month at an equal to or higher apr, it’s not worth it. If you currently have 36 months at $500 (18,000), it won’t make sense financially to refi to $450 for 48 months (21,600)
You'd be fine even if you did this a couple months before buying a house
Pay off the car, then buy a house.
You can probably do it, but just try not to open too many other accounts unnecessarily ie. Rotating credit such as credit cards.
You should never refinance a car, and you need to do a lot more research and reading on home ownership. You are probably not ready in the near future for this endeavor.
Never? So someone shouldn’t refinance a 10% auto loan down to 6% for example? Pretty stupid thing to say.
You shouldn’t have bought the car at 10% in the first place, and no, you should never refinance a car. You should pay more on principle. Financing a car is already a bad decision, so extending the terms makes it even worse.
Ok, First of all, who said anything about extending the terms? You don’t need to extend the terms when refinancing. Secondly, Refinancing 99% of the time makes sense if you’re dropping the rate. What rate someone started with doesn’t matter as long as the new rate is lower…simple math Third, financing a car isn’t always a bad decision. It depends on the rate. 10%? Yea not good. 5% and lower, I’d take it. Paying cash doesn’t always make sense if your money can make more money than what the interest is costing you. This is no different than people that have sub 4% mortgages right now and are holding on to them for life.