It may not be a credit card, but Afterpay is still a credit liability and must therefore be disclosed when applying for a home loan. And its not just Afterpay – zipPay, openpay, FuturePay, and zipMoney all need to be considered as part of your home loan application.
The majority of lenders have updated their systems to record information about borrowers’ buy now pay later commitments and it is expected that the rest will soon follow.
While this doesn’t bode well for shopaholics trying to get into their first home or refinance an existing mortgage, there is some good news. Most buy now pay later providers have a fairly short period in which to pay the full amount and a good mortgage broker will be able to liaise with lenders to note the expected payout date (especially if it is expected to be paid out before settlement). You may need to provide some additional evidence around your buy now pay later commitments, but with help from a mortgage broker you can still get the right loan for your circumstances.
There are some things you can do before applying for a home loan which will increase your chances of getting approval without needing to jump through hoops.
- Pay off any buy now pay later commitments and don’t add any new ones.
- Close any credit cards you aren’t using and reduce the limits on others wherever possible – when a lender looks at your loan application, they base the calculations on all your credit cards being maxed out, so if you reduce that amount, you increase your borrowing capacity.
- Check your credit rating – there may be errors on it which will impact on your ability to borrow money. Take the time to read it through carefully and arrange for any inaccuracies to be fixed prior to applying for a loan.
- Reduce your other expenses and redirect those funds to paying down other debts – do you really need Stan and Netflix? Can you reduce your monthly internet bill? The less debt you have, the easier it is for your mortgage broker to find you a good loan.
- Don’t miss any repayments – lenders have access to up to 2 years’ worth of your repayment history and they use this to help them determine if you are a “good risk”. Missed or late repayments suggest that you are struggling to manage your existing debt commitments, whereas regularly making payments on time suggests that you are on top of your financial situation.
Obviously, there are plenty of other things you can do to increase the likelihood of getting approval for your new home loan, but common sense applies. The lower your debt and higher your savings/other financial resources, the more attractive a borrower you become.