Should we buy a new car or our first home first?

The short answer

Decide which dream you want first. A car loan can reduce what a lender will let you borrow for a home, and the repayment sits in your budget for years. There's no wrong answer, but there is an order, and it's worth choosing it on purpose.

Which dream do you want to achieve first?

A typical couple I see. Young, both in IT, getting married soon. One of them has their eye on a very nice car. Both of them want a home.

The question I ask is always the same.

Which dream do you want to achieve first?

Not which one is right. Which one comes first.

Why the order matters

A lender looks at every repayment you already have. A car loan is a monthly commitment, so it usually reduces what they'll let you borrow for a home. Even credit card limits count, whether you use them or not.

I know this one from the inside. When I decided to buy my first home, I was still paying off a car loan and student debt. It slowed me down.

How to put your goals in order

Write down the big goals for the next five years. Wedding, home, car, baby, parents visiting.
Put them in order, together.
For each one, ask whether doing it first makes the next one harder.
If the car comes first, find out how its repayment changes your home budget before you sign for it.

Both dreams can happen. Choosing the order is what stops one quietly cancelling the other.

About Jigar Modi

I came to Australia in 2000 as a student with $850. I've worked inside two major banks and spent over 10 years in mortgage broking. That's over 15 years in lending, and more than $450M in settled lending.

Founder of First Home Ready. I help Indian professionals and families avoid costly financial mistakes before they sign. Read my story

Which dream do you want to achieve first?

Why the order matters

How to put your goals in order

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