One Loan For Both Home And Car

Can I have one loan to cover both my home and my car?

This is a rather common question. Home loans are always secured by the property, while a car loan can be either secured by the vehicle or taken out as an unsecured personal loan. The later is only available to borrowers with a clean credit history.

If you have some bad credit and would like to put both your mortgage and the car loan into a single facility, there must be sufficient equity in your property to secure both loans. Unfortunately the value of the car does not really come into the equation with this form of finance.

For example;

  • Home worth $450,000
  • Mortgage $250,000
  • Car loan $25,000

If you put your car loan into the mortgage the overall loan will be $275,000. That represents 61% of the property value and is therefore acceptable providing you have the necessary income to qualify for a larger mortgage. Maximum loans available with a bad credit mortgage refinance are usually to 80%.

However if you are looking to make a new purchase of a property worth $450,000 and need to borrow $400,000, then putting the car into the overall mortgage will take the loan to $425,000 for a property worth $450,000. That is a 95% mortgage. If you wish to borrow 95% of the property value your credit history needs to be impeccable.

In most cases it is only worthwhile to include a car loan into the mortgage if the home loan rate is significantly under the car loan rate and there is plenty of equity to allow such a refinance. Anyone buying their first home usually has limited deposit. In such circumstances it is best to keep the car loan and the home loan separate.