Using Your Home Loan To Pay For Your New Car
To save you on interest costs for a personal loan to purchase a new car, you may want to look into either refinancing or redrawing your home loan.
Doing so may allow you to get your new car much cheaper, but there are many negative features to be aware of as well. Do your research before you make any decision about using a home loan to buy a car.
Refinancing Your Home Loan
It is possible to refinance your home mortgage in order to free up some extra cash to buy a new car. Whether or not this is worth doing will depend on the value of your home, how much you owe, and what you are looking to borrow. You also may have to get your property inspected and reappraised. Your loan term could be refinanced for a longer term and lower repayments, but it could also increase your monthly interest rates. If you applied for your home loan a long time ago, then refinancing it in order to borrow money for a car could see you receive a better interest rate than what was available 15 years ago. Refinancing you home may end up costing you a high refinancing fee, and overall, your loan balance will increase due the addition of the car loan. This means that you will be spending more money over a longer period of time on interest rates.
Refinancing your home loan could also force you to pay the bank fees for altering the loan before the term is complete. You may also have to pay a stamp duty. Refinancing your home loan to borrow more money for the purchase of a car can be feasible, but it could also end up costing you more and extending the life of your loan.
Redrawing From Your Home Loan
Redrawing from your home loan may be another viable option for borrowing enough money to purchase a car. If you are ahead of your repayments, you could redraw from your mortgage and still only have one loan payment to make. This type of loan can also be obtained fairly quickly. Even if you don’t have the ability to spend more money right now on your repayments, you could still buy your car and make the minimum payments on your mortgage. However, because you are adding the cost of the car onto your home loan and therefore increasing your total balance, you will end up paying a more in interest over the life of the loan. You will either have to pay this extra interest or set up a repayment schedule that allows you to make more frequent repayments on the loan.
If you can arrange it, then redrawing from your mortgage in order to have enough cash to buy a car may be a good option, but you should talk to your mortgage specialist before you attempt it. If you are still looking for a car loan financed separately, see our guide on car loans.
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