Does Gambling Affect Mortgage Application Uk
One way for borrowers to avoid bank statements falling foul of lender underwriting is to shift the majority of spending to a credit card in the run-up to submitting an application, which is then paid off in full each month. Alternatively switching some payments, such as gambling, to cash could also help ease applications through.
- Gambling is deemed more of a risk than being self-employed especially if there is no trace of regular savings but a build-up of debt instead. You need to be aware that if you’re a professional gambler, this activity is seen as a risk and could result in your mortgage application being declined.
- If your mortgage application gets declined, there are a number of things you can do to improve your chances of getting approved next time. Don’t rush off to another lender as each application could show up on your credit file. This guide will help you understand why your application might have.
When you’re making a property purchase in the UK, the mortgage application process can be nerve-wracking. Lenders are scrutinising your finances and considering many variables, including “what-ifs,” when making an assessment. In this intense environment, how can a simple overdraft affect your application’s chances?
Type of Overdraft
The short answer is that it depends. In general, an overdraft isn’t an automatic write-off for an applicant. But depending on the type of overdraft and frequency, it can leave a definite stain on your approval chances.
You should first know that there are two different kinds of overdrafts: authorized and unauthorized.
- Authorized means that the bank knew about and agreed to it.
- Unauthorized drafts were not approved by the bank.
This comes into play when considering if it counts against your application. Lenders are looking for reliability when it comes to who they give money to. They want to know the person on the other end will be able and willing to pay them back. They take into account details large and small.
Overdrafts
What does your overdraft say about you? While having an overdraft on your account might not be the most impactful activity a lender looks at, trends like frequent unauthorized overdrafts can put you in the unreliable category. It can suggest to them that you are on a tight budget and might not be able to take on a mortgage.
The other issue with overdrafts is that, if you use it often, you are probably getting charged interest and fees from the bank. The lender adds this to how much you spend every month to determine how much is left over to afford your mortgage.
Even unused overdrafts can affect your overall assessment. If lenders see that you are granted a big overdraft from your bank, they may take into consideration the fact that you could use it in the future. Depending on the state of your finances, they might determine you won’t be able to make your mortgage payments.
Of course, overdrafts are not a death knell for your chances. Circumstances in your life could explain the overdrafts, like a new career. If a lender can explain the overdrafts, it is more likely they will approve. This all gets incorporated into their considerations.
What If You Were Declined?
You finally got the word from your lender, and they told you exactly what you were dreading: you have been declined. Where do you go from here?
First, you need to find out what happened. You can find out from your lender not only whether your overdrafts were a key factor, but what about them was a red flag. Ask lots of questions. You can use this information going forward when you want to apply again.
Your next option could be to speak to an adviser or mortgage broker. This person has a knowledge of which lenders you can go to based on your unique situation. This increases your chances of having a successful experience with your next application.
Applying for your mortgage is a stressful experience with so many unknown variables. The results are in the hands of someone whose determination is based on individual assessment. With an overdraft, you don’t have to worry about it being the end of your application; but even if it is, there are steps you can take moving forward.
Applying for a mortgage can be a tricky process for anybody, no matter what their age or financial situation. There are multiple factors that can affect a mortgage application, some of which you may not have considered previously.
One of the first things a lender will look at is your credit score. Again, this can be affected by various circumstances, but you may not have considered that a leisurely gambling habit could have its own consequences.
The mortgage application process
When you first apply for a mortgage, your chosen lender will assess your household income including your basic salary plus any extra income such as freelancing or benefits.
During this process, the lender will ask for documentation of your bank accounts, including copies of your statements for the past three to six months. Here, they'll be able to see your regular transactions, so it’s wise to keep an eye on your deposits if you’re a regular player.
Will online banking deposits affect my application process?
There is no clear-cut answer for whether or not a mortgage lender will refuse to lend you money based upon your gambling deposits. However, if they can see regular payments into online gambling operator accounts, these may present a cause for concern.
Why lenders have to look into your spending habits
The mortgage lending process has not always been so strict, but as most of us will recall from the credit crunch of 2007, being lenient can have its setbacks.
In 2014 and later in 2017, regulations were introduced for lenders which meant that they had to assess the affordability of a loan in much more detail. This included the aforementioned review of transactions – regular online gambling payments have been known to make lenders think twice.
Why gambling may deter lenders
Mortgage lenders don't pass judgement on applicants – they merely need to assess the risk of lending out thousands of pounds at a time.
However, statistically speaking, “problem” gamblers have less chance of having a healthy savings account, which in turn will affect the amount to which they can put towards a deposit and ultimately influence the outcome of their application.
There is no need for doom and gloom, however, as the majority of gamblers are not problem gamblers and just like to indulge in an occasional fun habit. Keep an eye out for any of these signs if you’re thinking of applying for a mortgage any time soon:
Spending less time with family and friends, and more time gambling
Depositing more money than you can reasonably afford
‘Chasing’ bets to recover losses
Losing enjoyment in gambling
To stay on the safe side when it comes to impressing mortgage lenders, there are a few pointers that you can bear in mind.
Improving your credit score
A credit score is a rating out of 1,000 (sometimes it can be out of 700) that determines your reliability as a person with credit. Personal wealth has no bearing on this. Instead, it is actually better to accumulate a small amount of debt, for example, a mobile phone bill, and continue paying this off in regular instalments to prove that you can maintain regular payments.
The beauty of a credit score is that it changes month by month – sometimes for better, sometimes for worse! You may find that “silly” things, such as small expenses like taking out a new mobile phone contract, affect your score by a few points.
However, your score can also increase over time. Sometimes this happens naturally as time wears on, for example, if you carry on paying off regular payments such as credit card bills.
You can also improve your credit score by paying off any old debts you might have. So, if you have an old store card that could do with knocking on the head, try taking a little out of your savings – your credit score will appreciate it.
Stop gambling
This is, of course, the last resort for those whose gambling deposits may look unfavourable on a mortgage application. However, as mentioned above, credit scores can improve over time, so if you need to tone down the gaming for a few months, it might be a worthwhile investment in the future.
If you’re not sure how to limit yourself when it comes to gambling, you can try out several different methods including a ‘time out’ or even self-exclusion, which can freeze your accounts for up to six months.
Set up a new bank account
If you’re not ready to stop gambling altogether, then your mortgage lender only needs to assess the accounts from which you make regular payments – for example, bills and taking wages. You're within your rights to set up a new bank account or to simply use an existing one which may be inactive.
Be careful, however – you need to monitor this bank account just as much as you would your main accounts. Transactions are still being made, so you should still keep a keen eye on your spending.
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What not to do
Believe that winning at online gambling will satisfy a mortgage lender
Just because the money you’ve invested in gambling is going back into your account, does not mean that mortgage lenders will class this as a reliable source of income!
Take out a loan to pay off gambling debts
If your habits have got to the point that they need a loan to pay them off, a mortgage lender will smell this a mile off.
Keep on gambling if you have a problem
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Sometimes, it might take others to convince you that a once leisurely pursuit is now too much time spent gambling. Consider a limit on your account if you identify with any of the statements listed above.
A mortgage lender is far more likely to judge your credit score than a few harmless bets. Pay your debts and be transparent with your spending, and the rest should be easy!