Buy a Car with Home Equity – Unlock Financial Freedom (2026)

Are you pondering the idea of purchasing a new car but unsure of how to finance it? Perhaps you've accumulated some equity in your home and are considering leveraging it to buy that dream vehicle. This blog will guide you through the possibilities and considerations of using a home equity loan to purchase a car, ensuring you make an informed decision that suits your financial situation.

Understanding Home Equity Loans

A home equity loan allows you to borrow against the equity you've built up in your home. Equity is the difference between your home’s current market value and the remaining balance on your mortgage. In Australia, as of 2026, property values have continued to rise steadily, offering homeowners an opportunity to tap into their increased equity for various purposes, including purchasing a car.

When you take out a home equity loan, you are essentially using your home as collateral. This means that if you're unable to repay the loan, the lender could potentially foreclose on your home. It's crucial to weigh this risk against the benefits of potentially lower interest rates compared to standard car loans.

Current Rates and Requirements

As of 2026, the interest rates for home equity loans in Australia typically range between 6.49% and 8.99%. These rates are generally lower than those for unsecured personal loans or credit cards, making them an attractive option for financing large purchases like a car.

To qualify for a home equity loan, lenders often require you to have at least 20% equity in your home. Furthermore, you'll need to demonstrate a stable income and a solid credit history. Each lender on Esteb and Co’s panel of over 83 lenders will have specific criteria, but the general requirements remain consistent.

Loan Type	Interest Rate Range	Collateral Required
Home Equity Loan	6.49% - 8.99%	Yes
Car Loan	7.5% - 12%	Typically No
Personal Loan	8% - 15%	No

Steps to Use a Home Equity Loan for a Car Purchase

1. Assess Your Equity: Calculate your current home equity by subtracting your mortgage balance from your home's market value. Ensure it meets the 20% minimum requirement.
2. Check Your Credit Score: A higher credit score will improve your chances of securing a favourable interest rate.
3. Research Lenders: Explore options from Esteb and Co’s panel of 83+ lenders to find the best terms and rates.
4. Apply for the Loan: Submit your application along with necessary documentation such as proof of income, credit history, and property valuation.
5. Finalize the Loan: Once approved, review the loan terms carefully before signing. The funds will then be disbursed to your account.
6. Purchase Your Car: With the funds in hand, proceed to buy your desired vehicle, ensuring it fits within your budget.

Expert Tips and Considerations

• Consider Loan Terms Carefully: While home equity loans can offer lower interest rates, they often come with longer repayment terms. Ensure you’re comfortable with the commitment.
• Factor in Additional Costs: Remember to include insurance, registration, and maintenance costs when budgeting for your car purchase.
• Evaluate Your Financial Stability: Be confident in your ability to make regular repayments to avoid risking your home.
• Seek Professional Advice: Consulting with a mortgage broker from Esteb and Co can provide personalized insights based on your unique financial situation.

Frequently Asked Questions

• Can I use a home equity loan for any type of car? Yes, home equity loans can be used for both new and used car purchases.
• How long does it take to get approved for a home equity loan? The approval process can take anywhere from a few days to a couple of weeks, depending on the lender and your financial situation.
• What are the risks of using home equity to buy a car? The primary risk is losing your home if you default on the loan. Ensure you have a solid repayment plan in place.
• Is it better to use a car loan instead? This depends on your financial situation. Car loans may have higher interest rates but do not put your home at risk.
• What happens if my home value decreases? A decrease in home value could result in negative equity, where you owe more than your home is worth, complicating future financial decisions.
• Can I refinance my home equity loan? Yes, refinancing might be possible if market conditions change or your financial situation improves, potentially offering better terms.