Can I Roll Car Finance into My Mortgage?

Types of Car Finance and Consolidation

Whether you can consolidate your car finance depends on the type of agreement you have:

• Personal loan used for a car — can be consolidated into your mortgage like any other unsecured debt
• Hire Purchase (HP) — you can settle the agreement early and use remortgage funds to do so, as the car becomes yours once the balance is paid
• PCP (Personal Contract Purchase) — more complex, as you don't own the car unless you make the final balloon payment. You can settle early, but the settlement figure may be higher than the remaining monthly payments
• Personal Contract Hire (PCH) — you're renting the car, so there's no balance to consolidate. You'd be paying for early termination, which is rarely cost-effective

Getting an Early Settlement Figure

If you have HP or PCP car finance, your provider is legally required to give you an early settlement figure within a set timeframe when you request one. This is the amount needed to clear the agreement in full. Under the Consumer Credit Act, you may also be entitled to a rebate of future interest charges if you settle early.

For HP agreements, the settlement figure is usually straightforward — the remaining balance minus any interest rebate. For PCP, it's more complex because of the balloon payment structure. Request the settlement figure before applying for your remortgage so you know exactly how much capital to raise.

Does It Make Financial Sense?

Car finance rates are typically 5% to 10% (or higher for those with poor credit), while mortgage rates are usually 4% to 6%. The rate saving is smaller than with credit cards, so the case for consolidation is less compelling. If your car finance rate is already competitive, the total cost of adding it to a 25-year mortgage may actually be higher than just keeping the car finance and paying it off over its original term.

It makes more sense when your car finance rate is high (above 8% to 10%), you're struggling with the monthly payments, or you're already remortgaging for other reasons and want to simplify your finances. Run the total cost comparison before deciding — a broker can help with this.

What Lenders Think

Most lenders are comfortable consolidating car finance into a mortgage, as it's a common and accepted form of debt. They'll want to see the settlement figure and confirmation of the finance type. Some lenders may note that clearing car finance improves your monthly affordability, which can actually help your remortgage application.

One consideration: if you have very new car finance (less than 12 months old), some lenders may question why you want to consolidate so quickly. This isn't usually a deal-breaker, but it helps to have a clear rationale, such as reducing your total monthly outgoings as part of a broader financial reorganisation.