You should always borrow at the lowest cost to you. The cost of a loan is a function of both the interest rate and the term. Mortgage borrowing is usually the cheapest form of borrowing in terms of interest rates but the term is usually longer. Therefore you should get a larger mortgage to cover the cost of the car, but pay off the 'car' part of it in a much shorter timeframe. Figure out what the seperate car loan and mortgage would cost monthly, then pay this amount off monthly on the mortgage with car loan included.