Can I put my car loan into my home loan?

Paying off a mortgage and a car loan at the same time can make it difficult to budget properly. If you’re looking to simplify your debt payments, it is possible to put your car loan into your mortgage.  

The process of combining your car loan and home loan is a bit complex so it’s best to be aware of all your options beforehand. Here’s what you need to know about bundling your car loan into your existing home loan. 

Ways to use your mortgage to pay for your car loan 

You can use your home loan to purchase a new car or join your car loan with your home loan using three main methods: loan consolidation, a redraw facility, or refinancing your home loan.  

Consolidate your debts 

You can use a consolidation loan to roll your mortgage and car loan into a single loan. You can also add in any other outstanding debts you might have. This could include credit cards, utility bills, personal loans, or other credit you’re currently paying off. 

With a consolidation loan, you’ll only have to think about one repayment instead of multiple every month, fortnight, or week. This simplifies things immensely and could make budgeting easier. However, there are usually additional fees associated with taking out a new loan such as exit fees, application fees, and the like. It’s best to review your finances and figure out if the added costs are worth it. 

Redraw facility to buy a car 

By making additional mortgage repayments, on top of your minimum repayments, you will likely accumulate extra funds in your home loan. If your home loan product has a redraw facility, the funds will accumulate in the redraw facility, available for you to withdraw for any reason such as buying a car or paying out an existing car loan.

Redrawing is essentially taking back the extra money you’ve paid towards your home loan, on top of your minimum required repayments. Take note that redrawing could mean missing out on loan interest savings and may lead to a longer loan term. Plus, accessing a redraw facility can sometimes attract fees or have withdrawal limits depending on the lender. Here at loans.com.au, our variable loans with redraw facilities have zero fees, and zero withdrawal limits.

Refinance your home loan 

When you refinance your home loan, you’re closing out on your existing mortgage and opening a new one. This option involves using some equity you’ve built up on your home to fund the car purchase. This means your refinanced home loan will include the remaining mortgage balance plus the cost of the vehicle. You’ll pay off the new home loan as agreed upon with the lender. 

You can also use refinancing as an opportunity to find better rates. Even with refinancing costs, you could save on the total interest paid if you choose a home loan refinance with low rates and better loan features.  

By refinancing your home loan to include your car loan, you don’t need to worry about making two separate repayments. However, because the car purchase is tied to your mortgage, it will take much longer for you to own the car outright. This could mean that over the entire life of the loan, you pay more in interest than you would have with the higher interest rate on a car loan. 

Pros and cons of combining your home loan and car loan 

Consider the following benefits and drawbacks when rolling your car loan into your mortgage: 

Advantages of putting your car loan into a home loan 

• Lower interest rate on your car loan. Because home loans generally have lower interest rates compared to car loans, by combining both you could see interest savings.  

• Only one repayment. Whichever option you choose, you’ll end up handling only one regular repayment. This can be a relief to many as they won’t have to juggle multiple debt payments every month. 

• You can capitalise on your home’s equity. Equity usually doesn’t require any effort on your part. Using it to purchase a car means you get the advantages of your equity immediately. 

Disadvantages of putting your car loan into a home loan 

• Owning a car takes longer and leaves you with more interest to pay. A car loan terms are usually around two to five years while mortgages are between 25 to 30 years. You could also end up paying more in interest as the loan term is stretched out. 

• Additional loan costs. Most of the time, combining your home loan and car loan incurs additional fees. 

• More risk if you default on the loan. Failing to pay off your car loan could also affect your home since it’s coupled with your home loan. 

Talk to the experts at loans.com.au 

If you’re looking for options, discuss your car loan needs with our friendly lending specialists. We can help you find the best finance solution for you!  

Apply for a car loan online today

Find out in under 2 minutes if you qualify for one of our low rate car loans.

Apply Now

Other helpful resources:

How long does car loan approval take?
Do you need a deposit for a car loan?
What are the requirements for a car loan?