We have a mortgage loan for 3.5% and just got a car loan for 1.49%. My husband thinks we should pay off the car with our mortgage loan instead of using the car loan because we can claim mortgage interest or something like that. I think that we should use the car loan to pay off the mortgage loan. Does that sound crazy? Thanks for any help.

  • 5
    How, exactly, can you use the car loan to pay off the mortgage? Wasn't the car loan used to buy the car? Feb 28, 2015 at 3:16

3 Answers 3


Why would you trade a lower interest rate over a higher one? I wouldn't use the mortgage to pay off the car. Also, you should have loan/lease payoff on your auto insurance, which if the car is totaled means your loan would be paid by insurance. I don't think you'd be able to take advantage of that if your car payments become one with the mortgage. Finally not all mortgage interest may be deductible.

Also, I can't think of any way you'd be able to use the car loan to pay off the mortgage. You wouldn't be able to borrow more than the car is worth, and for a new car it loses quite a bit of value immediately.


Were you just offered a car loan for 1.4%, or did you sign for a car loan for 1.4%? If you signed, it's too late. If you didn't sign:

You should realise that your car loan isn't really 1.4%. Nobody will give you a car loan for less than a mortgage loan. What really happened is that you gave up your chance to get a rebate on the car purchase. A car worth $18,000 will have a price tag of $20,000. You can buy it for cash and haggle the dealer down to $18,000, or you can take that "cheap" 1.4% loan and pay $20,000 for the car.

So if at all possible, you would try to get a cheap loan from your bank, possibly through your mortgage, so you can buy the car without taking a loan from the car dealer.

  • 1
    my credit union has car loans for 1.24%, so they may have a 1.4% loan from their bank. Mar 1, 2015 at 19:57
  • It's pretty much right. 0 or very low rate car loans are typically provided by a dealer to entice you into buying a car with a bigger markup. They can give you the low rate because they make more money with the markup immediately. If it's from a bank then the bank is likely getting a cut of the markup money from the dealer. Otherwise it wouldn't make sense to loan below the Fed rate. Aug 21, 2019 at 13:55
  • Except that the Fed rate is even lower ;) But yes, those are "incentive rates". Not unreal, but large car companies at least in Europe run their own banks that operate on different calculations - not as profit centers but to move goods out by offering cheap financing.
    – TomTom
    Aug 22, 2019 at 12:35

Gosh don't do either! Unless you are fully funding you ROTH accounts and even then I wouldn't do it. Those interest rates are free money.

You are giving away the best bargain in the history of home mortgages.

Don't you think you can make more than 4% on your money invested?

Don't you think in 5 years you will be able to make 4% on bond/cd's/ and other low risk investments?

Don't forget money you pay in the 2020's on beyond to your mortgage are inflationary dollars. Do you think that money will be more valuable in the 20's and beyond? I don't.

Roths are free money too. Think if you put 11k in there a year how much would you have at the end of it tax free. There is a reason you can only put $5,500 in them, they are too good a deal tax wise to let people put too much in there.

Think about this my parents bought their home in 1967 their mortgage was $170 a month. Inflation hits and the interest they are paying at 8%! mind you, it was still a laughable amount of money each month for mortgage payment from 1977 and on.

Also I bought a $450,000 house 38 months ago. Instead of putting down 180 I put down 80

I let the other 100k in my investment account and moved 5.5k over to Roth every year.

I now have a roth worth $38k and an investment account worth $105k. I made 40k on my money those three years and the 38k is tax free!

Get over the emotional need to be debt free and make a logical finical choice. I am begging you to think about this. This post could save you tens of thousands of dollars.

Let me put it one more way. 100k in debt with 100k in investments is debt free living. Especially when you debt is under 4% and a tax write off.

  • OP: "We have a mortgage and recently bought a car, should we keep the loans separate or combine them?" you: "don't do either". They have already bought the house and the car, they have two choices how to handle the loans (lump them together or leave them separate) unless you have a third option that I missed. Also, you talking about investing in the stock market or for retirement doesn't address the question that was asked.
    – rhavelka
    Aug 21, 2019 at 21:06

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