Financing

[Anonymous Poster]

Was making some changes on my homeowners insurance the other day and at the end of my conversation my agent asked if I knew about their loans available via equity line of credit.

Here's what my company will do. You can start up a line of credit secured against your home. They will handle all paperwork and there is a $40 fee payable at the time the credit line opens. If you don't use the credit line from year to year there is an annual $25 record keeping fee. The current interest rate is 4.75% and the interest is tax deductible. The payback is amortized over 7 years and there is no charge or limits on early payoff.

Downside of this is that the rate is tied to prime and as such is not a fixed rate product.

I bring this up because the current rate is about 3 percent less than what I secured with Deere and the tax deductibility of the interest is always a good thing. I'm considering paying off the Deere loan with the credit line. I realize that this is not a fit for everyone, but may be a good option for some.

Bob

 

[markie61]

Sounds like how I paid for my tractor - Crestar Bank has low-interest, no-closing-cost home equity lines with an intro rate of 4.75%. As long as you keep it open for three years or more, there are no fees even if you don't use it. If you close it withing 3 years, you have to pay the closing costs (about $550.)

Low interest + tax deductible = good!
Cash is always better if you have it, of course.

Mark

 

[RobS]

Bob, we took a home-eq line when we mortgaged our new house. I just used it to pay off my John Deere loan. Much better rate plus the deductible interest saved me a nice chunk /w3tcompact/icons/smile.gif

 

[Soundguy]

I didn't buy my tractor with it, but when me and the wife bought some more land last year, we found it was cheaper and easier to do the home equity credit thing, and borrow against the equity built up in the house. Got our loan faster, as they didn't care what we were buying, just did a home inspection/appraisal, and wrote the check...bought the land the same day. And at a lower interest than if I had taken a standard land loan.

Soundguy

 

[MossRoad]

I bought my Power Trac on a home equity loan that was below prime. Sitting at the loan officer my wife asked how much I needed for the tractor. I replied $15,000. She turned to the loan officer and told him we needed $40,000 line if credit /w3tcompact/icons/shocked.gif Guess we're getting a car too /w3tcompact/icons/laugh.gif

But seriously,

Isn't the interest only deductable if you surpass the standard deduction?

 

[hazmat]

<font color=blue>Isn't the interest only deductable if you surpass the standard deduction?</font color=blue>

I'm no accountant, but I think you're right. Not a problem for those who already have a first mortgage on the house.

 

[BillyP]

You can also borrow money using a CD for collateral, at a VERY cheap interest rate. It's usually 1 to 2% above the rate on the CD. I didn't have a CD so I finance through JD credit at 5.9% fixed. I also have a farm so the tractor and the interest is tax deductible.

Billy

 

[MossRoad]

<font color=blue>I also have a farm so the tractor and the interest is tax deductible</font color=blue>

Technically, I have a farm, too. I have a farm number and everything. Unfortunately, my tractor is 95% for home use, so the big guys at the IRS said, and I quote, "No." They keep an eye on hobby farmers, like me. Now, if I kept the tractor at the farm, and used it for farm business only, they would have no problems.

As for creative financing, there are lots of options out there. Low % financing from the dealers at a locked in rate can be safer than a home equity loan that is tied to prime.

 

[BigDave]

Let me throw out a cautious note. You are putting up your home to buy a tractor, be sure you can pay it off with a high degree of certainty, or you could end up homeless. A tractor may not be too dangerous, since it doesn't depreciate too quickly, and you should be able to liquidate it for little or no loss depending upon time since purchase. The real danger comes when you buy depreciating assests, (cars) entertainment (cruise around the world), or nickel & diming (TV, camera, gym equipment).

It can be smart money, but it's also easy money, so it can be dangerous.

 

[frank_f15]

YEP: if u don't have enough deductions, to total more than the standard ded. it is a non issue. another thing to make sure of ! is it a line of credit or a home equity loan? in my case it is a home equity line of credit, if i write no checks it cost me nothing. must be careful tho! some have a tendency to write to many checks, and only pay the minumim due. bad choice!!!
don't want to preach, just try to inform!/w3tcompact/icons/smile.gif