Refinance your house to include a car

Refinancing Your Home Loan to Buy a Car

Rates and Fees verified correct on December 10th, 2016

How to use your home loan to get you a new set of wheels

Interested in a new petrol-guzzler or environmentally-friendly vehicle but not sure how to pay for it?

Refinancing your home loan or leveraging the right features could be the answer, but there are some things you should be wary of before taking action.

How can I use my home loan to fund a car purchase?

There are many finance options available to help purchase a car such as leasing, personal loans or using a line-of-credit facility.

In this article, we’ll look at how you can use your home loan options like redrawing or refinancing to buy a new car.


Home Loan Tip

Option 1: Dip into your redraw

Before you consider refinancing your mortgage, you could try using a redraw facility if this is offered with your current home loan.

If you’ve been making extra repayments on your home loan, some lenders allow you to withdraw this surplus money, or ‘redraw’ it. Supposing you’ve made enough extra repayments, you could redraw this money and use it to buy a car.

This is usually a quick process because there’s no need to reapply for anything and you won’t get stung with a higher interest rate like personal loans because it’s your own money. Instead, you'll have lost the benefit of the extra repayments - namely that of a buffer and a quicker payout of your loan.

Many home loans today have a redraw facility to enable you to access the funds that you've made in additional repayments. However, different loans will have different conditions - such as fees for redrawing, maximum redraw amounts or fees for having a redraw facility- so it’s best to check with your lender first.


Option 2: Consolidate and refinance

Another way of using your home loan to purchase a car is to refinance your mortgage. This means you either refinance with your existing lender by negotiating a better rate, or you switch to a new lender to take advantage of different features or service- both of which can help you access funds to buy your new wheels.

If you refinance with a new lender, your property may need to be valued again to help the lender determine how much you can afford to borrow (if you want to increase your loan amount).

The main downside to adding the cost of the car to your new home loan is you’ll be stuck paying the car debt over the full term of your home loan. If you refinance to buy a car and keep paying the same repayments each month, on a $25 000 car at 6.78%, you’d pay a whopping $20 728.92 in interest by the time you paid off your home loan.

This means your average-priced car actually ends up costing you $45 728.92.

The best way to treat a refinance for your car is to treat it as if it’s a five year loan. Calculate what the repayments would be over five years at the same interest rate as your home loan and then add this to your home loan in the form of extra repayments each month. If you make a

If you make a conscious effort to make additional repayments on your loan, then refinancing to help fund a car purchase can make financial sense.

Rates last updated December 10th, 2016
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
loans.com.au Essentials - Variable Refinancers Only (Owner Occupier, P&I)
A low-interest rate loan suited for refinancing with no application or ongoing fees.
3.59% 3.61% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
ANZ Breakfree Package Home Loan - 2 Year Fixed (Owner Occupier) $150k+
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.75% 4.62% $0 $395 p.a. 95% Go to site More info
ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR
Enjoy a competitive interest rate when you have a deposit of at least 20%.
3.69% 3.69% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow from a minimum of $100,000 and $0 ongoing fee.
3.59% 3.60% $0 $0 p.a. 80% Go to site More info
CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)
Borrow up to 90% LVR and enjoy an introductory rate for the first 2 years.
3.69% 3.87% $600 $0 p.a. 90% Go to site More info
State Custodians Standard Variable Spring Special - LVR 80% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.59% 3.92% $0 $299 p.a. 80% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.84% 4.66% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 95% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.87% 3.92% $445 $0 p.a. 90% Go to site More info
Switzer Home Loan
No upfront or ongoing fees and a competitive variable rate for owner occupiers.
3.89% 3.89% $0 $0 p.a. 90% Go to site More info
State Custodians Standard Variable Spring Special - LVR 90% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.69% 4.02% $0 $299 p.a. 90% Go to site More info
3.94% 4.33% $0 $395 p.a. 90% Go to site More info
Greater Bank Ultimate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A discounted rate with 100% offset account. NSW, QLD and ACT residents only.
3.89% 4.27% $0 $375 p.a. 85% Go to site More info
Bank Australia Premium Home Loan Package - 2 Year Fixed (Owner Occupier) LVR < 80%
Buy a new home even if you haven't yet sold your existing one with the bankmecu Bridging Loan
3.69% 4.24% $0 $350 p.a. 95% Go to site More info
IMB Accelerator Home Loan  - LVR <=80% $300k+ (Owner Occupier)
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.64% 4.39% $445 $0 p.a. 80% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.89% 3.89% $0 $0 p.a. 85% Go to site More info
ClickLoans The Online Investor Home Loan - LVR <70%
An investment home loan with competitive rate and 100% offset account.
3.79% 3.79% $0 $0 p.a. 70% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.74% 4.40% $0 $375 p.a. 85% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
3.99% 4.81% $0 $0 p.a. 95% Go to site More info
AMP Essential Home Loan  -  Owner Occupier
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.98% 4.00% $350 $0 p.a. 90% Go to site More info
Bank Australia Premium Home Loan Package - LVR<=80% $700k + (Owner Occupier)
Enjoy the discounted interest rate with redraw facility and no ongoing fees.
3.74% 4.09% $0 $350 p.a. 95% Go to site More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for Owner Occupier with 100% offset account and no application or ongoing fees.
3.73% 3.73% $0 $0 p.a. 70% Go to site More info
Switzer Fixed Rate Home Loans - 2 Years Fixed Rate
A competitive 2 year fixed rate with your very own lending service manager.
3.97% 3.99% $0 $0 p.a. 80% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
3.99% 4.90% $0 $0 p.a. 95% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.69% 4.56% $600 $0 p.a. 95% Go to site More info
loans.com.au Fixed - 2 Year Fixed (Owner Occupier)
Another low interest rate offer from loans.com.au. No application fee to pay.
3.89% 3.72% $0 $0 p.a. 90% Go to site More info
3.89% 3.89% $0 $0 p.a. 80% Go to site More info
Switzer Investment Loan
An investment loan with no application or ongoing fees, and your very own lending service manager.
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
IMB Essential Home Loan - LVR < 80% (Owner Occupier)
100% offset account, unrestricted additional repayments and no monthly account keeping fees
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier)
No application or ongoing fees and a competitive 2 year fixed rate.
3.84% 4.75% $0 $0 p.a. 95% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.10% 4.14% $0 $0 p.a. 95% Go to site More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier)
Fee free extra repayments available during the fixed term. $1,250 cash back offer for refinancers. Conditions apply.
3.99% 5.00% $0 $395 p.a. 95% More info
Suncorp Home Package Plus Fixed - 3 Year Fixed Rate (Special Offer $150k+ LVR <=90% Owner Occupier)
Lock in a special offer rate for 3 years for loans over $150k with LVR below 90%.
3.64% 4.26% $0 $375 p.a. 90% More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.07% $0 $395 p.a. 95% More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years
A low interest rate home loan and competitive two year fixed rate.
3.99% 4.97% $0 $395 p.a. 95% More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% More info
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% More info

Benefits of refinancing

Refinancing can bring several benefits, such as:

  • Lower interest rates. You can stand to benefit from lower rates, or the opportunity to fix a competitive rate for a number of years which can lower your repayments over the life of your loan.
  • New loan features. Features like an offset account or redraw facility may not be offered with your existing mortgage which is why many borrowers switch to a new lender to take advantage of features that will help them manage their home loan.
  • Better service. If you're not satisfied with the customer service provided by your current lender, then it may be time to refinance to a new bank.

However, it's important to realise that refinancing can be expensive and it can also add years to your loan term so make sure you speak with an experienced mortgage broker before initiating the refinance.

Using your home loan features or refinancing to a new lender could be a good way to help purchase a new car, but make sure that you carefully consider the risks and costs associated with the refinance to ensure that it's the right move for you.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

ME Bank Basic Home Loan - LVR <=80% Owner Occupier

A low variable rate loan with no application or ongoing fees.

NAB Choice Package Home Loan - 3 Year Fixed (Owner Occupier)

Receive discounts on interest rates with the Choice Package. 250,000 Velocity Frequent Flyer point offer, conditions apply.

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11 Responses to Refinancing Your Home Loan to Buy a Car

  1. Default Gravatar
    Dean | February 19, 2015

    Hi,
    I have a $350,000 mortgage and paying an extra $150 a week on it.
    We have now though just got a car loan worth $11,000.
    Am I better off to keep paying the extra on the mortgage or pay it on the car loan to pay that off as quick as we can?

    thanks

    • Staff
      Shirley | February 20, 2015

      Hi Dean,

      Thanks for your question.

      Please note that finder.com.au is an online comparison service and is not in a position to be giving financial or personal advice.

      There are a few different methods for paying down debt:
      - Paying off the portion with the highest interest rate
      - Snowball method

      Depending on the type of home loan you have, there may be fees for paying out your loan early.

      All the best,
      Shirley

  2. Default Gravatar
    Kane | November 17, 2014

    I currently have a car loan, but want to buy a house. Problem is i can’t afford the repayments of both. Is there a way that i can include my current car loan into a home loan some way? That way i could afford both.

    Thanks for your help

    • Staff
      Shirley | November 17, 2014

      Hi Kane,

      Thanks for your question.

      Please note that you intend to include the outstanding balance of your car loan into your home loan, you could end up paying more interest because you’re extending the loan term of your car loan.

      In this case, it might be best to speak to a mortgage broker, as they’re home loan experts who can help you find the best loan for your situation.

      Cheers,
      Shirley

  3. Default Gravatar
    Josh | August 4, 2014

    Hi,

    If just say I have a loan of $100,000 on a house and then I decide that I want to refinance to buy a car and take out another $20,000.

    The place is used as a Investment property so I assume that the $20,000 is not tax deductible?

    Am I correct as I don’t want the tax man knocking on my door asking for money/fines.

    • Staff
      Shirley | August 5, 2014

      Hi Josh,

      finder.com.au can only provide general and factual advice.

      For personal tax enquiries, please speak to your trusted accountant.

      Cheers,
      Shirley

  4. Default Gravatar
    Erika | March 13, 2014

    Hi there, thanks for the article! I have question regarding my particular situation:

    I bought a house, paid in full, in cash. It is paid for. My mother is recommending that I refinance the house to buy a car among other things. She says this is a good way to obtain the money for a nicer car than we could otherwise afford (not much nicer, but for example a NEW nissan versa or leaf if we go eco-friendly, instead of a used one with a lot of miles on it). I, however, am worried, and wanted to get a second opinion. (Don’t tell her, haha). In my mind, taking out a second mortgage on a home which is already paid for doesn’t quite make logical sense, although she says it can be done and is done often; I don’t want to have to pay for my house again, when it is already paid for in full. The value of the house has also gone up significantly since I first purchased it, as we did quite a bit of remodeling, etc., so wouldn’t a new mortgage be at the cost of the NEW value of the house and not the original cost we purchased it for (less than 2/3 the current value)? That said, is it really worth the stress of having to pay the extra interest payments incurred? Will this be considered debt that counts against me or in my favor on my credit report?

    I appreciate your time and consideration!

    Also, I am in the US not .au. Just a heads up, info-wise…Thanks again.

    • Staff
      Shirley | March 13, 2014

      Hi Erika,

      Thanks for your question.

      Unfortunately we can’t be much of a help for general advice outside of Australia. You may want to consult this with a financial planner instead.

      One thing you may want to compare is the repayments from refinancing your property to the repayments from a separate car loan. Also look out for things such as the comparison rate and fees, as these may give you a clearer idea of how much the total cost of the loan may be.

      Cheers,
      Shirley

  5. Default Gravatar
    pooja | December 13, 2013

    what is the process for car loan to purchase.

    • Staff
      Marc | December 13, 2013

      Hello Pooja,
      thanks for the question.

      A car loan usually works by you applying for the specific product you want, getting your funds and then purchasing your car. Some loans will grant a sort of pre approval so you can go shopping and know that your bank will finance you for it. If you have any specific questions about how a particular loan product please let me know.

      I hope this helps,
      Marc.

  6. Default Gravatar
    Cristina | November 6, 2013

    Hi

    I have a question about using my redraw facility on my home loan.

    I am wanting to purchase a new car and would need to access roughly $20,000.

    My mortgage was split initially as half was variable and the other half was fixed. Both are now variable.

    I have always paid extra into my loans every fortnight for the past 5+ years.

    Currently my combined fortnightly minimum payments are $540, owing on $147,000 at 5.22%pa and I pay $900 fortnightly and have done so since the day I took out my loan.

    My question is in regards to treating your redraw amount as a 5 year loan, you say to calculate what this amount would be and pay that amount extra into your loan, so as to not pay it off over the lifetime of the loan. So does that mean paying the extra amount on top of my $900 that I’m accustomed to paying? Or paying the extra “car amount” on top of the minimum amount which is $540?if it is the latter I would have no problem in doing this as I already pay way above this amount anyhow, so would it in effect make little to no difference to my interest payments?

    I just don’t want all my hard work over the last 5 years to go to waste but at the same time I think I deserve a little reward for all my hard work!

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