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Should I refinance a car loan before I apply for a mortgage?

I need to refinance my car to get out of a high-interest car loan—but I'm also shopping around for a new home. Should I refinance the car loan first? Or should I buy the home first?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
It’s generally better to buy a house before you refinance, but it might be worth refinancing first if it will lower your debt-to-income ratio.
The choice to refinance a
car loan
 before you get a mortgage is highly dependent on several factors. Ask yourself these questions:
  • DTI: Will the refinance lower my debt-to-income ratio?
  • Debt: Will my debt go up as a result of refinancing? (This is usually the case of taking a cash-out loan)
  • Credit: Is your
    credit score good enough
     to absorb a 5–10 point hit from a hard inquiry?
In general, going house shopping before car shopping is the better idea, since it can be much more difficult to
apply for a mortgage
 than to refinance a loan you already have. However, it all depends on your personal circumstances! 
If you’re able to lower your overall debt by refinancing, it might be worth it. You can always speak to a mortgage broker to get their opinion, too. Good luck!
MORE:
The similarities between mortgages and car loans
Car LoanMortgageRefinancingAuto and Home Insurance
View full answer 
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