A new car and a new property are two of the biggestpurchases most people make. When they land in the same year, the order you buythem in can make a real difference to how much you can borrow and what you pay.
Here’s how car finance affects a home loan application, whento buy the car and how to keep both loans working for you.
When you apply for a home loan, the lender works out howmuch you can afford to repay. Every existing commitment comes out of thatamount first, including car loans, personal loans and credit card limits.
Lenders also test your home loan repayments at a rate higherthan the one you’ll actually pay, usually around threepercentage points above it. That’s why even a modest car repayment can havea big effect.
As a rough illustration, if your lender assesses home loanrepayments at about 9%, every $800 a month committed to a car loan could reducehow much you can borrow by around $100,000 over a 30-year loan. The exactfigure depends on the lender, your income and your other expenses.
Credit cards count too. Many lenders treat a percentage ofyour full card limit as a monthly commitment, even if the balance is zero.
For most people buying a home or an investment property,it’s better to buy the property first and the car after settlement. A fewreasons:
• Borrowing power. A new car loan before your homeloan application reduces how much you can borrow.
• Credit enquiries. Every formal creditapplication can appear on your creditfile. Several applications close together can make lenders cautious.
• Pre-approval isn’t final. Your home loan isassessed again before settlement. Taking on new debt between pre-approval andsettlement can put the loan at risk.
• Cash for the deposit. A car bought with savingsreduces your deposit and the buffer lenders like to see.
There are exceptions. If you need a reliable car to get towork, or your current car is costing you a fortune in repairs, it may makesense to buy it first. Just do it knowing the effect on your borrowing, andtalk to your mortgage broker before you sign.
• Get your home loan numbers first. Ask yourmortgage broker how a car repayment would change your borrowing power beforeyou commit to either.
• Get car finance quotes without a hard enquiry. Abroker can often give you indicative rates and repayments without a formalcredit check.
• Choose the right loan structure. A secured car loan usuallycosts less than an unsecured personal loan. A balloon payment lowers yourmonthly repayments, but leaves a lump sum to pay at the end and may still becounted by lenders.
• Reduce other limits. Lower or close credit cardsyou don’t use before you apply for a home loan.
• Time it after settlement. Once your property hassettled, apply for car finance based on what your budget can comfortably carry.
If you run a business, vehicles and equipment are oftenfinanced through the business. Lenders will still look at those commitments,especially if you’ve given a personal guarantee or if the business income ispart of your home loan application.
Investors planning their next purchase should think aboutthe same trade-off. Whether you’re buying a home or looking at higher-yield investmentproperty to improve cash flow, every finance commitment you take on beforeyou apply affects how much you can borrow. Plan the order of your purchasesacross the year, not one at a time.
Yes. Lenders count your car loan repayments as a commitment,which reduces how much you can borrow.
Usually after settlement, unless you genuinely need the carsooner. Speak to your mortgage broker first.
You can, but it can put your home loan at risk becauselenders reassess before settlement. Wait until after settlement if you can.
It lowers your monthly car repayment, which can help, butyou’ll need to plan for the lump sum at the end and lenders may still take itinto account.
A car and a property both make sense. Buying them in thewrong order can cost you tens of thousands in borrowing power or put a homeloan at risk at the last minute. Plan the year as a whole, buy the propertyfirst where you can and finance the car on terms that leave room in yourbudget.
Ready to look at car finance once your property plans aresorted? Get a quote from Motorlend online in a few minutes, with no impact onyour credit score for an initial quote.
This article is general information only and is currentas at October 2026. It isn’t credit, financial or tax advice and doesn’t takeinto account your objectives, financial situation or needs. Lending criteriavary between lenders. Example figures are illustrative only. Speak to alicensed mortgage broker or credit adviser before you apply for finance.
