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Refinancing Your Home Loan to Buy a Car

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

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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.

Data indicated here is updated regularly
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Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.29%
2.31%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
2.34%
2.34%
$0
$0 p.a.
60%
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner occupier, P&I)
2.17%
2.20%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
Virgin Money Reward Me Variable Home Loan - LVR ≤ 60% (<$500k Owner Occupier, P&I)
2.64%
2.81%
$300
$10 monthly ($120 p.a.)
60%
$3,000 refinance cashback.
A variable rate loan for owner occupiers with a 40% deposit (or equity) borrowing under $500,000. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.
IMB Budget Home Loan - LVR ≤80% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.61%
2.67%
$449
$0 p.a.
80%
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Yard Variable Home Loan - LVR 80% Special (Owner Occupier, P&I)
2.39%
2.42%
$0
$0 p.a.
80%
A very low variable rate loan for home buyers with an optional offset account ($10 monthly fee). 20% deposit required.
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Year (Owner Occupier, P&I)
2.29%
3.53%
$0
$395 p.a.
95%
Up to $3,000 refinance cashback.
Competitive fixed rate loan available with a 5% deposit. Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
homeloans.com.au Low Rate Home Loan with Offset - LVR 60% to 80% (Owner Occupier, P&I)
2.39%
2.41%
$0
$0 p.a.
90%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments. This loan is not available for construction.
Macquarie Bank Basic Home Loan - LVR ≤ 60% (Owner Occupier, P&I)
2.49%
2.49%
$0
$0 p.a.
60%
A competitive variable rate home loan for owner-occupiers. Requires a 40% deposit.
Virgin Money Reward Me Variable Home Loan - LVR ≤ 60% ($750k+ Owner Occupier, P&I)
2.55%
2.72%
$300
$10 monthly ($120 p.a.)
60%
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.
Athena Evaporate Home Loan - 60% to 70% LVR  Owner Occupier, P&I
2.39%
2.36%
$0
$0 p.a.
70%
A low variable rate for owner occupiers with 30% deposits. No upfront or ongoing fees.
AMP Bank Professional Package Variable Rate Home Loan - $100,000 and above, LVR ≤ 80% incl. LMI (Owner Occupier, P&I)
2.59%
3.00%
$0
$349 p.a.
80%
Get a sharp rate with no application or settlement fee, a redraw facility and 100% offset account. Other fees and charges apply.
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
2.44%
2.38%
$0
$0 p.a.
80%
A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.
Hunter United Fixed Home Loan - 2 Year Fixed (Owner Occupier, P&I)
2.19%
2.71%
$350
$0 p.a.
90%
Lock in a competitive rate for two years. Available with a 10% deposit.
Virgin Money Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I)
2.29%
2.87%
$300
$10 monthly ($120 p.a.)
80%
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.
IMB Budget Home Loan - Special LVR  ≤90% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.78%
2.84%
$449
$0 p.a.
90%
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
homeloans.com.au Low Rate Home Loan with Offset - LVR 80% to 90% (Owner Occupier, P&I)
2.74%
2.76%
$0
$0 p.a.
90%
Save on interest with a free 100% offset account and buy your property with just a 10% deposit. This loan is not available for construction.
Well Home Loans Balanced Fixed Home Loan - 2 Year (Owner occupier, P&I)
2.22%
2.21%
$250
$0 p.a.
90%
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
Sydney Mutual Bank Special Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.28%
2.86%
$250
$0 p.a.
95%
A competitive fixed rate loan for home buyers. Available with a 5% deposit.
Macquarie Bank Basic Home Loan - LVR ≤ 80% (Owner Occupier, P&I)
2.64%
2.64%
$0
$0 p.a.
80%
Pay no application and ongoing fees and take advantage of split and redraw options.
Endeavour Mutual Bank Special Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.28%
2.86%
$250
$0 p.a.
95%
A competitive 3 year fixed rate loan for home buyers. Available with a 5% deposit.
G&C Mutual Bank Momentum Home Loan - LVR <50% (Owner Occupier, P&I)
2.55%
2.57%
$0
$0 p.a.
A variable rate loan for owner-occupiers looking to refinance. This loan has low fees and a 100% offset account.
Bank of Melbourne Basic Home Loan - Special Offer (Owner Occupiers, P&I) LVR above 60% up to 80%
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback
A competitive variable rate loan from Bank of Melbourne. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
Well Home Loans Balanced Variable - LVR 90% (Owner occupier, P&I)
2.52%
2.55%
$250
$0 p.a.
90%
A very low variable interest rate for borrowers with a 10% deposit. Add a 100% offset account for $10 a month. Not available for construction purposes.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR ≤80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
HSBC Home Value Loan - Promotional Offer LVR 90% (Owner Occupier, P&I)
2.69%
2.70%
$0
$0 p.a.
90%
A competitive value home loan with no ongoing fee.
Macquarie Bank Basic Home Loan - LVR ≤ 90% (Owner Occupier, P&I)
3.04%
3.04%
$0
$0 p.a.
90%
Borrow up to $750K with an LVR ≤ 90% and pay no application fee.
Well Home Loans Balanced Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.27%
2.23%
$250
$0 p.a.
90%
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
Heritage Bank Fixed Rate Home Loan - 2 Year Fixed Rate (Owner Occupier, P&I) New Customers Only
2.59%
4.30%
$600
$8 monthly ($96 p.a.)
95%
Get a partial offset account and the option to make interest-only repayments.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.46%
$395
$0 p.a.
80%
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
Bluestone Prime Direct (Owner Occupier, P&I)
2.49%
2.51%
$0
$0 p.a.
70%
Bluestone's Prime Direct is a competitive variable rate home loan for borrowers with 30% deposits.
Newcastle Permanent Building Society Real Deal Home Loan - Special Offer 1 (Owner Occupier, P&I)
2.59%
2.63%
$595
$0 p.a.
80%
$2,000 refinance cashback
$2,000 cashback for eligible refinancers borrowing $250,000 or more.
BankSA Basic Home Loan - Owner Occupier, P&I
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback
A competitive variable rate loan from BankSA. Refinancers borrowing $200,000 or more can get a $4,000 cashback (Other terms, conditions and exclusions apply).
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier, P&I)
2.49%
4.12%
$595
$0 p.a.
90%
$2,000 refinance cashback
Investors can take advantage of a short term fixed rate with no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Heritage Bank Discount Variable Home Loan - LVR ≤ 80% (Owner Occupier, P&I) New Customers Only
2.78%
2.83%
$600
$0 p.a.
80%
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
CUA Achieve Variable Home Loan - $500k+ (Owner Occupier, P&I)
2.55%
2.60%
$600
$0 p.a.
95%
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, P&I)
2.29%
2.84%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Heritage Bank Advantage Package - 1 Year Fixed (Owner Occupier, P&I) New Customers Only
2.59%
3.34%
$0
$350 p.a.
95%
Get a partial offset account and flexible repayments with this package loan.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 2 Year Fixed (Owner Occupier, P&I)
2.44%
3.76%
$0
$395 p.a.
95%
$2,000 refinance cashback
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, IO)
2.29%
2.47%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.41%
$395
$0 p.a.
80%
A competitive fixed interest rate loan with no ongoing fees. Requires a 20% deposit.
Athena Variable Home Loan - Owner Occupier, IO
2.99%
2.59%
$0
$0 p.a.
80%
Owner occupiers can refinance to one of the most competitive interest-only rates in the market. No application fee and no ongoing fees.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, IO)
2.44%
2.85%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer Discount 1 ($150k+ Owner Occupier, P&I)
2.94%
3.34%
$0
$395 p.a.
95%
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, IO)
2.29%
2.44%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier, P&I)
2.54%
3.98%
$595
$0 p.a.
95%
$2,000 refinance cashback
Borrow up to 95% LVR of the value of the property you're buying and pay no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
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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.

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11 Responses

  1. Default Gravatar
    DeanFebruary 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

    • Avatarfinder Customer Care
      ShirleyFebruary 20, 2015Staff

      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 is a different method for paying down debt:
      – Paying off the portion with the highest interest rate

      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
    KaneNovember 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

    • Avatarfinder Customer Care
      ShirleyNovember 17, 2014Staff

      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
    JoshAugust 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.

    • Avatarfinder Customer Care
      ShirleyAugust 5, 2014Staff

      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
    ErikaMarch 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.

    • Avatarfinder Customer Care
      ShirleyMarch 13, 2014Staff

      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
    poojaDecember 13, 2013

    what is the process for car loan to purchase.

    • Avatarfinder Customer Care
      MarcDecember 13, 2013Staff

      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
    CristinaNovember 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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