How to Use a Vehicle as Collateral for a Mortgage Loan

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Typically, when a person obtains a mortgage, the home the mortgage is tied to becomes the collateral. While it's possible to use a vehicle that's completely paid off as collateral for part of the mortgage, it can only be done under special circumstances and with particular lenders. In addition, the lien would still remain on the home until it's paid. One possible situation would be if you were purchasing a home at a higher price than what the bank is willing to finance. In this situation, the bank may take your vehicle as collateral to make up the difference.

  • Pay your vehicle off so you have a clean title without a lienholder attached. Your vehicle cannot be used as collateral if you still owe money on it, and a lienholder already has a staked interest in it.

  • Call different mortgage lenders in your area and explain your situation to them. You'll want to keep trying until you find one that's willing to take your vehicle as additional collateral for the mortgage loan. Whether you'll be able to work out a deal in this manner will depend on many other factors, such as your credit history, employment history, wages, the appraised value of the home, the price you're going to pay on the home and the value of your vehicle. The lenders that will be willing to include a vehicle as additional collateral will likely only do so if you're fully qualified in all of these other categories. Some mobile and manufactured home parks that self-finance homes may have more relaxed guidelines for using vehicles and other items of value as collateral than the regular banks and mortgage lenders.

  • Choose to work with the lender that gives you the best terms. After the lender draws up the contracts, read through them thoroughly before signing. In addition to the regular mortgage papers and forms, you'll also need to sign the collateral rights of your vehicle over to the bank. In essence, this will mean that if you default on your mortgage at any time, the lender has the right to repossess your home and your vehicle.

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