It might sound odd to young people to consider cashing in some of the equity on their house in order to purchase a new car. After all, they are scratching and saving so that they can actually build equity. At the same time, there are times after 5 or 10 or 15 years where equity plateaus might entice them to take a look at using almost interest-free financing in order to pay for their next vehicle. And of course, the older you get, the better the deal it becomes.
In Australia, it is quite normal for older people that are retired to take out a senior reverse mortgage and buy a new car with the equity. In the United States, one of the most popular senior reverse mortgages allows seniors to buy a home closer to their children. As part of that settling, they can often negotiate including the financing of a new car. One of the reasons that older people choose to get a new car is that it makes it easier for them to envision a 15 or 20-year sojourn at their new, probably smaller condominium or flat.
Here are some other reasons that getting a new car with a reverse mortgage makes sense:
You are literally borrowing from yourself:
Just like using a life insurance policy, creating a reverse mortgage is one of the better ways of ensuring that your loan is legally coming from yourself, providing you with some financial advantage when it comes to how much and on what terms it needs to be paid back. The key thing for older people is that when they do start to look at a reverse mortgage, they should try and get several opinions from experts so that they do not have problems with a reverse mortgage that isn’t that useful for them from a terms standpoint. The cost of owning a car is going down:
It may be a couple of more years before it is completely possible to buy self-driving cars. Yet already, there is the talk of doing away with auto insurance as we know it as soon as self-driving cars arrive. In Arizona, several thousand people are currently testing Google self-driving cars for free. Meanwhile, companies like Uber and Apple are also field testing the latest equipment. So, although you probably won’t be able to actually purchase a self-driving car for at least two years, you certainly can get on a waiting list and use your reverse mortgage funds to purchase one once they are available. Self-driving cars and hybrids are two types of vehicles that should lower your overall ownership costs.
Using a senior reverse mortgage to finance the purchase of a car can make sense at all ages if you have enough equity in your home. The notion that you can save money overall by doing so is a compelling reason to look into the different options available to you. The number of self-driving and hybrid car choices available will also increase in the future, making looking at the details now a very good idea.