Can I Refinance My Mortgage and Auto Loan at the Same Time? (2024)

The main way to refinance a mortgage and an auto loan at the same time is to opt for cash-out refinancing and to use the equity in your home to pay off the auto loan. In this case, you would start a new loan that covers the rest of your home mortgage plus the auto loan balance.

Combining Mortgages and Auto Loans: Pros and Cons

While it may be tempting to combine your auto loan and home mortgage, this comes with some serious downsides. Below, we’ll explain some of the pros and cons of combining home and auto loans using cash-out refinancing.

Paying for auto loan debt through your new mortgage expands the car’s payoff period to as long as 30 years. That means you’ll be paying interest on your refinanced auto loan for a much longer term unless you make extra payments.

You can avoid this additional interest by making extra monthly payments on top of your mortgage for the amount of your auto loan. If your overall goal is to have a lower monthly payment, though, that defeats the purpose of combining these two loans.

Should I Refinance My Mortgage and Auto Loan Together or Separately?

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It’s true that stretching an auto loan over 25 years makes each payment more affordable. In the example above, though, you’d pay over $14,000 in interest on a $20,000 loan amount. Even bad credit car loans have loan-to-interest ratios that are better than that.

How To Save Money Refinancing a Mortgage and Auto Loan Together

There is one way to refinance a mortgage and auto loan at the same time and still save money. You’ll need to make extra payments each month to cover the auto loan debt within your mortgage. Here’s what that scenario looks like compared to a standard auto loan:

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In the example above, you could pay off your car’s original loan with your mortgage in five years and save almost $1,000 in interest. However, you’d have to pay $375.59 each month on top of your mortgage payment to make this happen.

Are You Eligible To Refinance Your Home Mortgage?

Consider the factors below to learn whether you could be eligible for refinancing your mortgage.

• Credit score: As with any loan application, the potential lender will look at your credit report and the state of your personal finances. A positive credit history and financial situation could help you secure lower rates on a combined mortgage and auto loan.

• Equity: You need enough equity in your home to pay for the auto loan and to maintain at least 15 to 20% equity after that. If you end up with less equity, you’ll have to pay for private mortgage insurance and may not even qualify for refinancing.
• Debt-to-income (DTI) ratio: Lenders usually prefer that your debt payments not exceed 40% of your overall income, as this could signal that you’ll struggle with debt repayment.
• Loan-to-value (LTV) ratio: When refinancing, the new lender will usually require an LTV of less than 125%. That means your loan can’t make up more than 125% of the home or car’s actual value. If you have bad credit, the lender might require an LTV of 90% or less to reduce the likelihood of going upside down on the loan.

Be sure to check your existing loans for prepayment penalties, as 36 states and the District of Columbia allow your current lender to charge penalties if you cancel a loan of shorter than 60 months.

Nothing stops drivers from refinancing an auto loan and a mortgage at the same time but separately. By doing so, you could avoid paying decades of interest on your current auto loan and won’t be using your home’s equity to pay off debts.

Generally speaking, refinancing home and car loans separately makes more sense than combining them. You just need to think about when to refinance your car and home based on your financial goals and credit history.

When To Refinance Your Mortgage First

In many cases, it’s smart to refinance your mortgage before your auto loan. Since hard credit inquiries can damage your credit score and are required for both applications, it’s a good idea to refinance your larger loan first. It takes between 30 and 60 days to close on a mortgage refinance, so you’ll need to wait that long before you can start refinancing a car.

When To Refinance Your Auto Loan First

You may want to begin with an auto loan refinance if your debt-to-income (DTI) ratio currently disqualifies you from refinancing your mortgage loan. Even though your credit score will take a hit, refinancing your auto loan can lower your payments and potentially improve your DTI ratio. This could increase your odds of qualifying for mortgage refinancing in the future.

Source: Capital One

Auto Approve: Top Choice for Refinancing

Starting APR: 2.94%
Loan amounts: $5,000 to $85,000
Loan terms: 12 to 84 months

Auto Approve works with a network of lenders to offer refinanced loans for various types of vehicles. To qualify, your car needs to be less than 10 years old and have fewer than 150,000 miles on the odometer. Auto Approve works with borrowers who have fair credit and above. The company has an A+ rating and accreditation from the Better Business Bureau (BBB).

Keep reading: Auto Approve review

MyAutoloan: Most Popular Marketplace

Starting APR: 3.99%
Loan amounts: $5,000 minimum
Loan terms: 24 to 72 months

You can use myAutoloan to shop around and compare multiple refinancing lenders at once. Borrowers with excellent credit can find loan offers with rates as low as 3.99%. MyAutoloan has been in business since 2003 and maintains both an A+ rating and accreditation from the BBB.

Read more: MyAutoloan review

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.

Here are the factors our ratings take into account:

• Reputation (25% of total score): Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
• Rates (25% of total score): Auto loan providers with low APRs and high loan amounts scored highest in this category.
• Availability (25% of total score): Companies that cover a variety of circ*mstances are more likely to meet consumer needs.
• Customer Experience (25% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.

*Data accurate at time of publication.