[USER]

Need some advice.. My fiancé and I are in the process of buying a new home. We are trying to figure out if it makes sense to use some of our down payment funds to pay off our car.

$575k house
$200k down payment
We owe about $37k left on the car.

We crunched the numbers, if we pay off the car and use $60k (ish) it increases our P&I payment by about $250 per month however it saves us $650 in monthly car payments.

We figure we can use this $400 monthly savings and either pay off extra on our mortgage or use it and fund our emergency fund a bit more.

A bit about us:
We make $125k combined annually, the $650 car payment is our only debt.

[Donna]

I would sell the car and buy a cheaper paid off car like $10k car. That will solve the car problem and will also lower your insurance payment.

If you want to keep it, yes, I will pay off car first and take that $250 more in payment but will be putting rest of the money ($400) towards principal or emergency fund.

More will be going to principal and you will only have the house as your only debt so it can expedite getting it paid off.

Doing both will slow down the process and you will be carrying more risks.

You know buying a home even if everything new doesn’t end with monthly payments you will change things, repair things, buy contents, and maintain things and having $37k debt in car is going to be hard with that income with everything else that comes with being a homeowner.

[Maribeth]

You don’t say how far into the process of buying you are. If you are actively trying to get a loan set up with a lender, you should not move large sums of money around, it’ll freak them out.

Talk to your broker or realtor for horror stories about this LOL. HOWEVER if you’re not that far into the process, then the idea of paying off the car is a good one.

Just make sure it’s not going to tank your house deal.

[Jeremy]

Figure out the total costs, not the monthly payments. Living life by monthly payments will destroy you.

[Kathy]

I would
Pay the car off. Use half of the car payment to pay
On principal and other half in a slush fund

[Bassel]

I’m assuming the interest rate on car is higher than house. Also, the interest on house is a tax deduction.

And in general, I despise debt on depreciating assets so avoid car loans if I can.

[Author]

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