I have my car loan as a part of my mortgage. Now, I want to buy a new house and I'm applying for a Proof of Funding (POF).
My salary is (relatively) good, so the limiting factor is my equity. When selling my house I'll (hopefully) be left with approximately USD 100,000. In my county, your equity must cover at least 15% of the worth of the house. So, with USD 100.000 I can buy a house worth USD 660,000.
Now, if I full finance my USD 20,000 car with a new loan (with higher interest), I will have an equity of USD 120,000. As far as I know, since the car is full financed, the car loan will not reduce my equity (that's why the interest rate is higher isn't it?).
So, if I divide my mortgage in two, my equity will be USD 120,000, and I will be able to buy a house for USD 800.000.
I know that a higher interest rate on the car is a bad thing, but a few % of 20,000 isn't much compared to the other sums, and compared to the benefit of buying the house I want.
Am I missing something here? Is this a smart thing to do?