Combine Mortgage & Car Loan? Here's How to Save
Struggling with separate loans? Discover how combining them can ease financial stress. Simple steps to regain control today.
Combining your mortgage and car loan may seem like a convenient way to manage your debts, but is it the right financial move for you? With interest rates fluctuating and financial products constantly evolving, it's crucial to consider all aspects before making a decision. Here, we delve into the details to help you understand if combining your mortgage and car loan is a viable option for your financial situation.
Understanding Mortgage and Car Loan Combination
Combining your mortgage and car loan essentially means consolidating your car loan into your home loan. This can result in a single monthly repayment and potentially lower interest rates, but it's important to understand how this works. By rolling your car loan into your mortgage, you could be spreading the cost of your car over a longer period, typically 25-30 years, which can affect the total interest paid over the life of the loan.
Current Market Rates and Requirements
As of 2026, the average interest rates for car loans in Australia range from 6.49% to 12%, depending on your credit score and the lender. In contrast, home loan rates are generally lower, averaging around 4.5% to 6%. This difference can make consolidating seem attractive, but the long-term implications must be considered.
| Loan Type | Interest Rate Range | Typical Loan Term |
|---|---|---|
| Car Loan | 6.49% - 12% | 5 - 7 years |
| Home Loan | 4.5% - 6% | 25 - 30 years |
Eligibility criteria for combining these loans often include having sufficient equity in your home, a good credit score, and a stable income. Lender policies vary, so it's crucial to consult with a mortgage broker to explore your options.
Steps to Combine Your Mortgage and Car Loan
To combine your mortgage and car loan, follow these steps:
- Evaluate Your Current Financial Situation: Assess your existing debts, income, and expenses to determine if consolidation is feasible.
- Calculate Potential Savings: Use an online calculator or consult with a financial advisor to estimate the total interest savings over the life of the loan.
- Contact a Mortgage Broker: With access to 83+ lenders, Esteb and Co can help you find suitable options tailored to your needs.
- Apply for Loan Refinancing: Once you select a lender, submit your application for refinancing your mortgage to include your car loan.
- Review and Finalise the Agreement: Carefully read the terms and conditions before signing the agreement to ensure it aligns with your financial goals.
Expert Tips and Considerations
Before proceeding with loan consolidation, consider the following expert advice:
- Understand the Long-Term Impact: While consolidating may lower your monthly payments, it could increase the total interest paid over the loan term.
- Consider Other Debt Reduction Strategies: Explore other options like debt snowball or avalanche methods, which might be more cost-effective.
- Maintain a Good Credit Score: A higher credit score can help you secure better interest rates when refinancing.
- Consult with a Financial Advisor: Professional advice can provide clarity and help you make informed decisions.
Frequently Asked Questions
- Can I combine any car loan with my mortgage?
- Not all car loans are eligible for consolidation. You'll need to check with your lender or mortgage broker to see if your loan qualifies.
- Will combining my car loan into my mortgage affect my credit score?
- Initially, applying for refinancing may result in a small dip in your credit score, but over time, consistent payments can improve it.
- How much can I save by consolidating my loans?
- The savings depend on the interest rate differential and the remaining term of your loans. A financial advisor can provide a precise calculation based on your circumstances.
- What are the risks of combining loans?
- The main risk is paying more interest over the longer term, as a car loan spread over 30 years can become expensive.
- Can I revert the consolidation if it doesn't work for me?
- Reversing a consolidation can be complex and costly, so it's best to ensure it's the right decision before proceeding.
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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.