Car Loan in Mortgage? Find Out Fast (2026 Guide)
Struggling with separate payments? Discover if bundling your car loan into your mortgage can simplify life. Check your options today.
It's not uncommon for Australian homeowners to find themselves juggling multiple loans and debts, from mortgages to car loans and personal loans. The allure of consolidating these debts into one manageable repayment can be strong, especially if you're trying to ease your monthly financial burden. So, can you add a car loan to your mortgage? Let's explore this possibility and see if it might be the right solution for you.
Understanding Combining Car Loans with Mortgages
At first glance, adding a car loan to your mortgage might seem like a straightforward way to streamline your finances. By rolling your car loan into your mortgage, you could potentially benefit from a single monthly repayment at a lower interest rate. However, this decision is not without its complexities and requires careful consideration of both the advantages and potential pitfalls.
When you consolidate a car loan into your mortgage, you essentially increase your mortgage balance to pay off the car loan. This can lead to a lower monthly payment due to the typically lower interest rates associated with home loans compared to personal or car loans. But it also means that the car's cost is spread over the term of the mortgage—often 25 to 30 years—potentially increasing the total amount of interest paid over time.
Interest Rates, Requirements, and Options
As of 2026, Australian home loan interest rates vary significantly across lenders but generally range from 6.49% to 12%. Car loans, on the other hand, often come with rates between 7% and 15%. By consolidating, you could be saving on interest if your existing car loan rate is higher than your mortgage rate.
To add a car loan to your mortgage, there are several key requirements you must meet:
- Equity in your home: You need sufficient equity to increase your mortgage amount.
- Good credit score: Lenders will assess your creditworthiness.
- Stable income: Proof of a reliable income source to manage the higher mortgage amount.
- Loan-to-value ratio (LVR): Most lenders require an LVR of 80% or less.
Options for consolidating a car loan into your mortgage include refinancing your current home loan or applying for a home equity loan. Each option has its own benefits and drawbacks, which should be carefully evaluated.
| Option | Pros | Cons |
|---|---|---|
| Refinancing | Potentially lower interest rate, single payment | Extends loan term, possible fees |
| Home Equity Loan | Keep original mortgage terms, use equity | Separate loan, may have higher rate |
How to Add a Car Loan to Your Mortgage
Follow these steps to consolidate your car loan into your mortgage:
- Evaluate Your Financial Situation: Assess your current debts, interest rates, and monthly payments. Determine if consolidating is financially beneficial for you in the long term.
- Calculate Your Home Equity: Use your home's current market value and your mortgage balance to calculate available equity.
- Consult with a Mortgage Broker: An expert from Esteb and Co, with access to 83+ lenders, can help you find the best refinancing or home equity loan options.
- Choose the Right Lender and Product: Compare offers from different lenders to find the best rates and terms that suit your needs.
- Submit Your Application: Provide necessary documentation, such as proof of income and a credit report, to your chosen lender.
- Complete the Refinancing Process: Once approved, your lender will settle your car loan and adjust your mortgage accordingly.
Tips and Considerations
Before proceeding with consolidating your car loan into your mortgage, consider the following expert tips:
- Long-Term Costs: Although your monthly payment might decrease, extending the car loan over your mortgage term could increase total interest costs.
- Future Financial Goals: Consider how increasing your mortgage affects your ability to achieve other financial goals, such as saving for retirement or children's education.
- Interest Rates and Fees: Refinancing involves fees and charges. Ensure that potential savings outweigh these costs.
- Flexibility: Some lenders offer flexible features, such as extra repayments and redraw facilities, which might be beneficial.
- Professional Advice: Seek guidance from financial advisors or mortgage brokers to ensure this decision aligns with your broader financial strategy.
Frequently Asked Questions
1. Can I add other debts to my mortgage besides my car loan?
Yes, many homeowners consolidate multiple debts, including personal loans and credit card debt, into their mortgage. However, this increases the mortgage balance and extends the repayment term, so it should be done with caution.
2. What are the risks of adding a car loan to my mortgage?
The main risk is paying more interest over time due to the longer loan term. Additionally, if you can't meet the higher mortgage payments, you risk losing your home.
3. How can I determine if I have enough equity to add a car loan to my mortgage?
Calculate your home equity by subtracting your current mortgage balance from the market value of your home. An LVR calculator can help assess if you meet lender criteria.
4. Will consolidating my car loan affect my credit score?
Initially, refinancing might impact your credit score due to the credit enquiry. However, over time, consistent repayments can improve your credit profile.
5. Is it better to pay off my car loan separately?
It depends on your financial situation. Paying off a car loan separately might be more cost-effective if you can manage the payments and avoid extending the debt over a longer period.
6. Can Esteb and Co help me with consolidating my car loan?
Absolutely. With access to 83+ lenders, Esteb and Co can guide you in finding the most suitable refinancing options tailored to your individual needs.
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With direct experience helping Australians secure home loans, car finance, and business funding, Ricky founded Esteb and Co to bring transparency and technology to mortgage broking.