Differences Between Refinancing Mortgage vs Auto Loan

Your car and your house are probably two of your largest expenses from month to month. With multiple types of loans, deciding which one to prioritize can be a challenge — especially when you have the opportunity to refinance. Here’s what you need to know about refinancing, from why it makes sense to where you should start.

Why Refinance a Car Loan or Mortgage?

Refinancing a loan essentially means taking out another one to pay it off. When you signed the agreement for your car loan or mortgage, you probably compared different lenders to find the best rates. Those rates continue to change over time. If you switch to a new lender today, there’s a good chance you can get a different loan term, monthly payment or interest rate. That often means you’ll pay less in the long run.

The Differences Between Car Loan Refinancing and Mortgage Refinancing

The principles of refinancing remain the same when you compare a car loan versus a mortgage. However, the two loans have some key differences that you’ll need to consider before you refinance either:

• Asset value: Mortgages are much larger than car loans. Since refinancing them is more of a risk for the lender, they tend to be more selective when it comes to terms and approval. A higher ratio of debt to income can affect your ability to get a mortgage more than it would a car loan.
• Asset age: Lenders consider the age of a car when refinancing since vehicles depreciate in value over time. If your car is more than 10 model years old, your options might be limited. Homes typically need to meet minimum property standards for refinancing, but age is usually not a significant factor.
• Term length: A home is a larger investment than a car, so mortgages have longer term lengths — often ranging from 10 to 30 years. Car loan terms are measured in months, which makes refinancing simpler.

Should You Refinance Your Car Loan or Mortgage First?

While you can get a car loan while refinancing your house, doubling up and getting a great rate on one could prevent you from getting the best deal on the other. If you want to refinance both, starting with your car often makes the most sense because you have a shorter window of time to get a new car loan. Additionally, refinancing your car loan can help lower your debt-to-income ratio, which means you’ll be likely to get a better rate on your mortgage.

Learn More About Your Auto Refinance Options

If you’re ready to refinance your car loan, RefiJet can help you save. Find out if you qualify and get in touch with our team to get started!

‍