REThink Real Estate
Additionally, the $20,000 of additional interest you referenced in your question is (a) entirely tax deductible as mortgage interest, and (b) probably an overestimate, based on a 30-year loan life, which you've said your plans are to stay in the home closer to 10 years than 30.
The other flawed assumption is the idea that $1,200 is the sum total of what your current car will need for repairs between now and the time that you buy a home. What if, God forbid, you spent the $1,200 and did the repairs, only to have something else, potentially something more costly, break down on the vehicle? The fact that you just recently had to make $400 in unexpected repairs is proof that this is a very real possibility.
My sense is that, at the very least, it behooves you to make the investment in making your car safe to drive. And it's even possible that it makes sense for both your auto and housing needs to actually buy a newer vehicle.
So sit down and talk over this issue with your mortgage broker, and get a definitive answer about whether buying a newer car will actually impact the terms of your mortgage, and by how much. Your mortgage broker could very well come back and say that you could bear an auto loan up to 'X' amount of dollars before impacting your mortgage situation. Only then will you be truly equipped to make the smartest decision about whether to repair your car or buy a newer one.
Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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Recharge your open houses
What's Your Home Worth?
Time for agents to make the rules