Does Paying off a Car Loan Affect My Ability to Qualify for a Mortgage?

Does Paying off a Car Loan Affect My Ability to Qualify for a Mortgage

Our team at Good Fellow’s Auto Wholesalers has heard this question from a majority of the clients who walk through our doors. This is why our used car dealership in Toronto has decided to create a blog post to answer the same question for anyone else who is wondering. Both a car loan and mortgage loan are known to be the two biggest financial purchases for Canadians, that’s why it’s important to get this question answered honestly and fairly. The simple answer here is that both of these loans can affect each other but not necessarily in a bad way. Let us explain.

Payment History

Both a mortgage and car loan will take a look at your credit report and how well your ability is to repay the debt you owe. This can work to your advantage as if you are continuously making your car payments on time, mortgage lenders will reward your good credit. Your payment history is a big part of your application therefore, as long as you make your payments on time, you have a high chance of qualifying for a mortgage loan.

Debt to Income Ratio

In order to find a balance between paying your mortgage loan and car payments, it’s best to first determine what your debt to income ratio is. This is simply because lenders prefer you to be under 35% for car loans and 45% for mortgages (these ratios are not fixed and may change over time).

To calculate your debt to income ratio, you will have to take all of your monthly debt payments and divide them by your monthly income. Determining this ratio ahead of time will help you understand if you are a good candidate for either loan.


If you are paying for a car loan, this will feature into affordability calculations for your mortgage. For example, your credit card, groceries, and bills will all be subtracted. This is similar to the debt to income ratio but we are using cash amounts instead of percentages. As long as you can comfortably afford both car loan payments and a mortgage, you should be able to get what you want.

How We Can Help

If you have additional questions regarding how a car loan can affect your ability to qualify for a mortgage, our team at Good Fellow’s Auto Wholesalers is here to help. Speak to our auto financing in Toronto team today and have our financing staff walk you through the process. If you have a challenging credit situation, our team is confident that we can help you. Get help getting approved for a car loan now by giving our team a call at 1 (855) 581-9590 today.

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