Car Loan to Buy a House? Discover Your Options (2026)

You've successfully secured a car loan and are now contemplating taking the next big step: buying a house. But the question that lingers is, "Can I buy a house with a car loan?" It's a common dilemma, particularly in the 2026 Australian housing market, where financial commitments can feel overwhelming. Yet, with the right guidance and understanding, your dream of homeownership doesn't have to be a distant aspiration.

Understanding Buying a House with a Car Loan

Buying a house while managing a car loan is entirely possible, although it requires careful financial planning and an understanding of how lenders assess your overall financial situation. Lenders will look at your credit score, debt-to-income ratio, and existing financial obligations, including your car loan, to determine your borrowing capacity for a home loan.

Your car loan is considered a financial obligation that can affect your borrowing power. However, this doesn't necessarily mean it will prevent you from securing a mortgage. The key is to ensure that your car loan doesn't significantly impact your ability to meet mortgage repayments.

Current Market Information and Key Considerations

As of 2026, the Australian housing market remains competitive, with interest rates for home loans ranging from 6.49% to 12%. The Reserve Bank of Australia has maintained a cautious approach to interest rates, balancing economic growth with inflation targets. On the other hand, car loan rates generally range from 4% to 10%, depending on your credit profile and the lender.

When considering a home loan, lenders from Esteb and Co's panel of 83+ lenders will evaluate several key factors:

• Credit Score: A good credit score (typically above 700) can significantly improve your chances of securing a home loan at a favourable rate.
• Debt-to-Income Ratio: Ideally, your total debt obligations, including your car loan, should not exceed 40% of your income.
• Loan-to-Value Ratio (LVR): Most lenders prefer an LVR of 80% or less, meaning you should aim for a 20% deposit on the property.

Steps to Buying a House with a Car Loan

Here's a step-by-step guide to help you navigate buying a house while managing a car loan:

1. Assess Your Financial Situation: Review your income, expenses, and current debts, including your car loan. This will give you a clearer picture of your financial standing.
2. Improve Your Credit Score: Pay off any outstanding debts and ensure all bills are paid on time. Reducing your credit card balances can also help boost your score.
3. Calculate Your Borrowing Power: Use a home loan calculator to estimate how much you can borrow, factoring in your car loan repayment.
4. Save for a Deposit: Aim for a 20% deposit to avoid paying Lenders Mortgage Insurance (LMI). Consider setting up a dedicated savings account to reach your goal faster.
5. Consult with a Mortgage Broker: Engage with Esteb and Co to explore loan options across 83+ lenders. A broker can provide tailored advice and negotiate the best terms for your situation.
6. Get Pre-Approved: Secure a pre-approval from a lender to understand the exact amount you can borrow, which will make house hunting more targeted.
7. Find Your Property: With pre-approval in hand, start looking for homes within your budget. Consider engaging a buyer's agent to streamline the process.
8. Finalise the Loan: Once you've found a property, your mortgage broker will assist in finalising the loan, ensuring all paperwork and legal requirements are met.

Tips and Considerations

Here are some expert tips to consider when buying a house with an existing car loan:

• Consolidate Debts: If feasible, consider consolidating your car loan and other debts into your home loan to reduce interest rates and simplify repayments.
• Negotiate Better Car Loan Terms: If your car loan has a high-interest rate, consider refinancing it to lower your monthly payments, freeing up more funds for your home loan.
• Maintain Financial Discipline: Continue budgeting diligently and avoid taking on new debts during the home-buying process.
• Consider Future Expenses: Factor in ongoing costs of homeownership, such as maintenance, rates, and insurance, to ensure they fit within your budget.
• Stay Informed: Keep abreast of market trends and interest rate changes to make informed financial decisions.

Frequently Asked Questions

• Can I get a home loan with a bad credit score if I have a car loan?
  Yes, but it may be challenging. Improving your credit score before applying for a home loan is advisable.
• Will my car loan affect my borrowing capacity?
  Yes, as it is considered a liability that affects your debt-to-income ratio.
• Should I pay off my car loan before applying for a home loan?
  It's not necessary, but reducing debts can improve your borrowing power.
• Can a mortgage broker help me if I have a car loan?
  Absolutely. Brokers like those at Esteb and Co can provide tailored advice and explore loan options that suit your financial situation.
• Is it better to consolidate my car loan with my home loan?
  In some cases, yes, especially if it reduces your overall interest payments. However, consider the long-term implications of extending the loan term.
• What is the ideal debt-to-income ratio for a home loan?
  Lenders generally prefer a ratio of 40% or less.
• How can I improve my borrowing power?
  Improve your credit score, reduce existing debts, and increase your deposit savings.