Can I Remortgage to Buy a Car?

Yes, but it’s important to note that not all mortgage lenders are on board with this idea.

Those who do permit it view it in the same light as releasing home equity for other non-essential activities, like going on a holiday.

Securing a car falls under the ‘non-essential’ category. Because of this, some lenders might put certain rules and limits on how much you can borrow, while others may examine your application more thoroughly before giving a nod.

Choosing the right mortgage lender can greatly influence your success in this venture. The correct selection can be the key to getting approval instead of rejection and avoiding strict loan-to-value (LTV) caps and other lender stipulations.

How Much Equity Can I Access to Buy a Car?

The amount of equity you can release is significantly influenced by your lender’s loan-to-value (LTV) guidelines. Some lenders might allow you to borrow between 65-75% of your home’s value if you are remortgaging for non-essential expenses, while others are willing to extend up to 85% or even potentially 95% LTV.

To explore your options and see what might work for your circumstances, just plug in some of your mortgage details into the calculator below. It could provide the insights you need!

[Embedded Remortgaging Calculator]

What Do Lenders Consider When Remortgaging to Buy a Car?

You might find lenders more willing to offer a higher LTV remortgage for this non-essential purchase if:

  • You’re an Existing Customer. Some lenders may offer more favourable LTV rates if you’re already a customer, especially compared to new clients switching from a different lender.
  • Have a  good credit score. Maintaining a good credit score can smooth the path to securing a high LTV remortgage. However, if you have some credit glitches, securing a high LTV might be more challenging, irrespective of your current equity status. Checking your credit reports through a free service could give you a clear picture.
  • Have stable financial standing. If nothing major has changed in your financial circumstances since your initial mortgage agreement, it could be easier to gain approval from your current lender.
  • Not Nearing Retirement. Lenders may be hesitant to extend a mortgage that goes into your retirement years. Keeping the new term within your working years might give you a better shot at a high LTV mortgage.
  • Be Employed Full-Time. Your employment status matters too. For example, Coventry Building Society has a cap of 75% LTV for full-time employees but limits it to 65% for self-employed individuals.

To get an accurate assessment of your chances of approval, speak to a mortgage broker. They can help you find a lender that is likely to approve your application and get you the best possible deal.

Infographic detailing factors lenders consider for remortgaging to buy a car.

Potential Roadblocks When Remortgaging to Buy a Car

While considering remortgaging to finance a car purchase, you may come across a few hiccups. Lenders often have specific criteria that could potentially limit your options. Here are some common restrictions you might face:

  1. Buying as an Investment or Business Use. If you intend to buy a car as an investment or for business reasons, some lenders might not approve your application.
  2. Additional Checks. Be prepared for extra underwriting checks. Some lenders might want assurance that the equity you wish to release is on par with the car’s purchase price.
  3. Proof of Purchase. You may be asked to provide proof that the funds will be used to purchase a car.
  4. Strict LTV Caps. If your property is already mortgage-free, some lenders might impose a stricter LTV cap.

Furthermore, it’s essential to meet the eligibility criteria outlined by mortgage lenders. Your creditworthiness will be evaluated anew, so make sure to familiarise yourself with the lending criteria, which we have detailed in our comprehensive article on mortgage applications.

Other Options to Finance Your Car Purchase

If buying your next car outright isn’t feasible, don’t fret; there are other ways to finance your purchase besides remortgaging. Here are some alternatives you might consider:

Car Finance – A conventional method to cover the cost of a new car. You have various options including personal loans, personal contract purchases, hire purchases, and leasing agreements.

Second Charge Mortgages – If remortgaging doesn’t suit your circumstances, a second charge mortgage might be an alternative. This type of mortgage is a secondary loan secured against your property’s equity. Although available for car purchases, note that some lenders might limit the total LTV to 75%.

Bridging Loans – In certain niche circumstances, like quickly securing a high-value vintage car at an auction, a short-term bridging loan might come in handy if other lending avenues aren’t accessible.

Equity Release – If you’re above 55 and don’t want to remortgage to fund your car purchase, equity release can be a viable option, permissible for any legal purpose, including lifestyle purchases.

Remember, it’s always best to weigh all your options before settling on a financial plan. Make sure to choose the one that aligns best with your financial situation and goals.

Alternative car financing options including car finance, second charge mortgages, bridging loans, and equity release.

Should You Use Your Mortgage to Fund Your Car Purchase?

Using your mortgage to fund a car purchase is a big decision that should not be taken lightly. It is a significant commitment and requires careful consideration.

Here are some things you need to think about:

  • Your specific needs and current financial situation.
  • Whether you can afford the monthly repayments on the car and the mortgage.
  • The interest rates and fees associated with using your mortgage to fund a car purchase.
  • The impact on your credit score.
  • The alternatives to using your mortgage to fund a car purchase, such as a personal loan or a car loan.

It is important to speak to a mortgage broker before making a decision. They can help you understand your options and find the best solution for your needs. Remember, making informed decisions is essential for protecting your financial health in the long term.

The Bottom Line

In conclusion, many mortgage lenders are reluctant to approve a remortgage for buying a car, as they often view it as a non-essential expense similar to a luxurious holiday. This means that your application may be subject to more scrutiny than other loan requests.

It is therefore important to understand the different eligibility criteria and requirements of each lender. This is where working with an experienced remortgage broker can be helpful.

They can help you save time and money by going through the complex process quickly and efficiently. They also have strong industry connections, which can help them find the best deals and negotiate terms that align with your financial goals.

If you want to find the best remortgage deal without any hassle, get in touch with us. We will connect you with a qualified remortgage broker who will make the entire process easy and help you secure a deal that is good for your long-term financial health.