Will Having Car Finance Stop Me Getting A Mortgage?

Choosing between sliding behind the wheel of your dream car and finally getting on the property ladder is an impossible task. I mean, how could you choose!? Well, we’re here to tell you that you might not have to. Though both types of loans require a great level of commitment, you might be able to swing them both if you have the right circumstances aligned. In fact, many people in the UK get car finance to purchase a vehicle and still apply for a house mortgage.

If you are concerned about whether getting car finance will affect getting your mortgage, the answer is yes. However, it will not stop you from accessing the mortgage if your credit history is good, and more importantly, if you can afford the monthly repayments. So, you’re applying for a mortgage, is car finance an issue? Let’s find out how car finance affects mortgage applications.

Does Car Finance Affect Mortgage UK?

If you're stressing about whether car finance can affect your mortgage application in the UK the answer isn’t quite as straightforward as one would hope. In fact, it depends on many different factors which revolve around car finance and loans in general. 

Car Finance Applications and Credit Scores

Your credit score is a detailed record of every credit and overall financial dealing you’ve had over the last few years: any credits and loans, any bill payments, any loan defaults or even bankruptcies. The better your credit score, the more responsible lenders will perceive you. Therefore, you’ll be able to get both a car or property loan much more easily and you’ll benefit from very cheap interest rates

When you take out car finance, your credit score isn’t directly affected per se. However, if you fail to make timely payments each month to pay back your loan, or if your car is repossessed at any point, your credit score will be pretty severely damaged. This could result in you becoming ineligible for a mortgage because of a very low credit score. However, if you keep up with regular car finance payments, your credit score will increase. Therefore, car finance can both help and hurt your credit score.

Your Repayment Ability

Car finance will stop you from getting a mortgage if you can't afford to make every monthly payment. When looking through your application, car finance providers and mortgage lenders carefully go through your debt-to-income ratio so that they can determine your ability to pay back the loan on both a car and a house.

Your Overall Debt

Car finance is a form of debt. The mortgage lender will consider this outstanding debt when calculating your affordability. If your car loan monthly repayments are high, you might not want to take on additional borrowing. Even with lower monthly repayments, you may have other forms of debt, such as a credit card balance, that will still impact your ability to handle a mortgage.

Purchase Power

Before approaching a mortgage lender, examine your financial situation to determine whether you can afford car finance as well as a house loan. If most of your cash is committed to paying for a vehicle, you might have less money left to finance a mortgage. If you are already in a car finance deal, you can defer the mortgage application for a few years until you can afford it.

Tips for Applying for Car Finance And a Mortgage

As most of us go through life, it's difficult to avoid going for car finance. Buying a car without getting a loan is a luxury few of us can avoid. Thankfully, getting a car loan won't prevent you from getting a house loan - you just have to stick to a few tips and tricks to make sure you don't damage your chances. 

  • Don't borrow more than you can afford with certainty. Always budget before you apply for credit, and leave a margin for monthly emergencies and unexpected spending. 
  • Don't go for a car that is slightly more expensive than what you can comfortably pay each month. 
  • Don't take out a car finance deal with high-interest rates and APRs. 
  • Check the fine print in a car finance agreement before you sign - there could be hidden fees that will cost you down the line. 
  • Always make your car payments on time - it's a surefire way to improve your credit score instead of damaging it. 
  • Clear the balance on your car loan as soon as you can to help with your debt-to-income ratio. 
  • Don't make too many credit applications within a short period of time. Several applications register negatively and could impact your credit score negatively. This also could signify that you are desperate for money, and chances are you will not pay back the cash.
  • Don't apply for a mortgage and car loan at the exact same time. 
  • Check your credit score regularly to see where you stand. 

Why Would Your Mortgage Application Be Denied?

If you have a car finance deal in play, your mortgage application could be denied. Okay, but why? Let's find out!

Missing Monthly Payments

Your car loan application requires you to make monthly repayments. Defaulting or making late payments significantly affects your credit score. If the mortgage provider determines you are not keeping up with car finance payments, you may not be approved for a loan.

Poor Or No Credit History

As a first-time buyer, there is no true evidence that you are able to pay off your debts and loans. Lenders need to assess your creditworthiness before approving your application. If you have never taken out a loan or don't have credit cards, it will be hard to prove your reliability. 

If this is your situation, you will need to find other ways to prove your financial obligations for the mortgage application to go through. Here, you can use your house utility bills, previous rent payments, and income history as proof.


Lenders are wary of individuals who take out a lot of loans, especially if it's all at the same time. Taking out expensive car finance might limit your ability to proceed with a mortgage application, especially if you have struggled to meet the payments consistently.  The mortgage provider will deny your request for a loan for your house if they determine that you have over-borrowed and are in debt.

A high debt to income ratio is a clear indication that you are not making enough money to pay off a mortgage. When thinking about car finance and mortgage, make sure you can afford to sustain both expenses and still handle your daily costs.

We've Got Your Back

Getting your dream house or car is a priority for most people. The challenge comes with how to finance both a house and a car. Before applying for car finance and mortgage please do an affordability check, before signing up for either finance plan.

If your debt level from car financing is high, it might stop you from getting a mortgage deal of your choice. Remember that all lenders have to check your credit reliability to pay back the loan before advancing it.

If you are looking for car finance deals, stop by Carmoola to know how to go about it. When you're ready, you can apply simply and quickly apply on the app, and you will know the result within minutes! We have a handy feature on our app where you can calculate your budget in just 60 seconds! Once you've got an estimate of your budget, our handy calculator can give an estimate on your monthly instalments.