Financing a car and a house simultaneously sounds risky and could jeopardize financial stability. Some financial experts may argue that purchasing a house and a car within the same year is unwise because it may significantly impact your debt-to-income ratio. Nevertheless, both can easily fit into the basic needs category; hence it is understandable if you find yourself stuck, especially if you are working on a limited budget.
It is even harder to choose between a car and a house or go with both today than five years ago. Home prices rise exponentially, with the car market flaring due to the ever-changing inflation rates.
A realtor will advise you to wait for a couple of months until you close a deal on the house before purchasing a new car. However, everything on the market takes longer than it used to close. Therefore, waiting may be more expensive than actually taking the risky move. Read on to learn the benefits and disadvantages of buying a house and a car at the same time to help you make an informed decision.
Here are the advantages of buying a house and a car simultaneously.
You Get Two Birds With One Stone
Most decisions to buy a new house and car are steered by necessity. The COVID-19 pandemic caused a significant plunge in several industries, including the housing and automobile markets. There is an insatiable demand for housing, as the tough times have forced people to give up or upgrade their homes. According to Move.org, about 35.5 million people move annually; thus, the gap could widen with the surging prices.
The supply chain issues triggered drastic decisions and interfered with most people’s plans. Most people found it necessary to find better homes to accommodate the new work-from-home norm, and public transport was out of the question. In a nutshell, different life circumstances may prompt such decisions and overshadow any expert advice.
If this option sounds out of reach for you, a better alternative would be to buy a used car and still proceed to place an offer on a new house. Used cars do not always mean being old and problematic. A well-maintained car is as good as new and could serve you as long as a showroom car would have. Going for hybrid vehicles will help you save further. Be sure to find with excellent security features, too, since there is a vehicle theft every 41 seconds.
Early car companies tried introducing a mix of electric and gasoline-powered vehicles before petrol-powered engines stole the show. Mixte by Mercedes Benz set the standard for modern-day models with a gas engine at the front with a dynamo that supplied sparks for duo motors in the rear hubs. However, modern-day hybrid vehicles may not beat Mixte’s 75 mph speed, but they will help you get around efficiently. With this option, you can achieve your housing needs and buy a newer vehicle.
Here are the disadvantages of buying a car and a house at the same time.
Affects Your Financial Stability
Houses and cars are high-risk investments with hefty price tags. This means you must plan adequately to satisfy these needs without deeper problems. Some situations may not allow you to wait for the perfect time to buy, especially due to the constant fluctuations.
When prices are high, you must take out a bigger mortgage, thus paying extra for the home and the new vehicle. Such unforeseen events may drain your savings, emergency funds, and credit cards, leaving you with more debt.
Affects Your Purchasing Power
With most of your money already going into housing and car expenses, you may have to significantly cut down on other costs for a speedy financial recovery. To reduce costs, it is wise to seek refuge in the right debit or credit card.
Several credit and debit card companies offer a 0% intro APR until 2024, offering up to 5% cash back rates at zero annual fees. With a little research and extensive due diligence, you can considerably reduce your spending, at least for an extended period, as you try to recover financially.
Reduces Your Credit Score
A high-interest loan to your name affects your credit score. The longer you take to pay your debt, the higher the risk it poses to your creditworthiness, thus limiting your financial future. Paying off your debts consistently is important to avoid major credit damage. Timely payments will gradually improve your credit score, thus improving the health of your credit report.
Whether to buy a car or a house depends on your financial ability and risk tolerance. Plan early by creating a budget and actively saving towards such purchases, especially if you plan on starting or expanding your family.