Car Loan? Here's How to Secure a House Loan Fast

Are you dreaming of owning your own home but worried that your existing car loan might throw a wrench in your plans? You're certainly not alone. Many Australians find themselves in this predicament, wondering if it's possible to secure a house loan with existing debts. The good news is, it is possible, and with a bit of strategy, you can make your dream a reality. Let's delve into how you can navigate this financial balancing act and come out on top.

Understanding House Loans and Car Loans

Before diving into the specifics, it's crucial to understand what house loans and car loans are and how they impact your financial standing. A house loan, also known as a mortgage, is a secured loan that enables you to purchase a home. In Australia, these loans typically require a deposit of at least 20% of the property's purchase price. Car loans, on the other hand, are usually smaller and can be secured or unsecured, depending on whether the vehicle is used as collateral.

When applying for a home loan, lenders assess your overall financial health, including any existing debts such as car loans. They calculate your capacity to repay the new loan based on your income, expenses, and current obligations, which can affect how much you can borrow and the interest rate you’ll receive.

Current Interest Rates and Lending Criteria

In 2026, the Australian mortgage market is experiencing a competitive environment with interest rates ranging between 6.49% and 12% depending on the lender and your financial profile. Car loans typically have interest rates ranging from 5% to 15%.

Lenders consider several factors when you apply for a home loan:

• Credit Score: A score above 700 is generally preferred, but Esteb and Co can connect you with lenders who accept scores as low as 620.
• Income: Steady and sufficient income to cover both the car and home loan repayments.
• Debt-to-Income Ratio (DTI): Lenders favour a DTI under 30%, although some may accept up to 40%.
• Deposit: At least 20% of the home’s value is standard, though lower deposits may be considered for first-time buyers with lender’s mortgage insurance (LMI).

Steps to Secure a House Loan with a Car Loan

Here’s a step-by-step guide to help you secure a house loan even if you have an existing car loan:

1. Review Your Finances: Conduct a thorough review of your income, expenses, and debts. Use this information to determine what you can realistically afford.
2. Improve Your Credit Score: Pay down existing debts, including the car loan, to improve your credit score and increase your borrowing potential.
3. Consult with a Mortgage Broker: At Esteb and Co, our brokers can guide you through the process and connect you with lenders from our panel of 83+ options who are most likely to approve your application.
4. Get Pre-Approval: Obtain pre-approval for a mortgage to understand your borrowing limits and demonstrate your seriousness to sellers.
5. Budget for Additional Costs: Don’t forget to account for stamp duty, legal fees, and potential LMI in your budget.

Expert Tips and Considerations

Here are some expert tips to enhance your chances of securing a home loan with an existing car loan:

• Refinance Your Car Loan: Consider refinancing to a lower interest rate to reduce your monthly repayments and improve your DTI.
• Boost Your Savings: Increasing your deposit can offset concerns about existing debt and may lead to better loan terms.
• Choose the Right Lender: Different lenders have different criteria. Work with a broker to find the best match for your situation.
• Consider Co-Borrowing: If possible, co-borrowing with a partner can increase your income and decrease your DTI.

Frequently Asked Questions

• Can I get a house loan if I’m still paying off a car loan?
  Yes, it is possible, though your car loan will be considered in your overall debt assessment.
• Will my car loan affect my borrowing capacity?
  Yes, it may reduce the amount you can borrow for a home loan as it impacts your DTI ratio.
• Should I pay off my car loan before applying for a house loan?
  While it can improve your application, it’s not mandatory. Weigh the benefits of paying it off against your need for a home loan.
• Are there lenders who specialise in dealing with existing debts?
  Yes, brokers like Esteb and Co can connect you with lenders who are flexible with applicants who have existing loans.
• What if my credit score is low?
  Improving your credit score should be a priority, but some lenders still offer options for those with lower scores.
• How can I improve my chances of getting approved?
  Review and improve your financial standing, consider refinancing existing loans, and consult a broker for tailored advice.
• What is the role of a mortgage broker?
  A mortgage broker assists in finding the best loan options tailored to your financial situation by accessing a wide range of lenders.