Borrowers who are after a home loan are under more scrutiny than ever and there are unexpected expenses that are now influencing a consumer’s ability to secure a mortgage.
Expenses such as subscriptions to Netflix, payments using Afterpay and plans to conceive through IVF are factors that have reduced a consumer’s borrowing power.
Almost unsurprisingly, gambling has become the latest habit to be added to the growing list of expenses that lenders are keeping an eye out for.
The number of punters affected by the move could be significant, with recent data from the Australian Institute of Family Studies finding that more than 574,000 Australians regularly engage in sport related betting.
A new lending market
Lenders are keeping an eye on how you spend your money
Betting habits – big and small – have been attracting the attention of lenders recently.
For those thinking that cashed-based wagers might be a loophole, think again. The increased scrutiny extends as far as large cash withdrawals, which some lenders consider an attempt at hiding gambling habits.
On one occasion, a young man was targeted for withdrawing a large sum of money from an ATM near a casino. It was later found to be given to his mother, but this case became an example of the lengths banks are willing to go to in order to expose a gambling habit.
Borrowers need to prove they are worthy of mortgage approval
Steve Vicary, the director of White Knight finance, told Domain that the burden is now on borrowers to prove they are worthy of loan approval.
“Any idea that someone has a gambling habit is a red flag to a lender,” Vicary said.
“We’ve had a couple of clients who’ve had a direct impact on their finance applications because of their gambling.”
Gambling can reduce your borrowing capacity
Vicary predicted that an applicant who earns the average income of $82,436 but bets $50 per week would reduce their borrowing capacity by almost $32,000.
If the amount that is betted increases to $200 a week, gambling would reduce their borrowing capacity by $127,000 – presuming they are able to get a loan altogether.
Will gambling affect my credit report?
The act of gambling itself is not enough to change your credit report. Provided you’re not borrowing money to finance the habit, your credit report should remain unaffected by the occasional wager.
But you may be expected to explain your spending when you submit recent bank statements for a mortgage assessment.
For this reason, it’s worth keeping tabs on what you’re paying for with your debit or credit cards.
If you are on the hunt for a house and want to gamble responsibly, it’s probably best you do so with cash at a physical betting location. This will minimise any risks during a mortgage assessment.
When will it become a problem for lenders?
Spending money on a discretionary expense, or worse, putting yourself in hot water for a discretionary expense, will not sit well with lenders. After all, it is their money and it will be up to them to assess your reliability as a borrower.
Your credit score ultimately tells a lender if you will be able to consistently repay the money they have lent to you. If this is jeopardised in anyway by an expense that doesn’t fall under the category of necessity, it will affect your home loan approval.
If you are found to have borrowed money to finance the habit, that is also likely to be seen as an even bigger red flag.
Gambling has caused mortgage holders headaches in the past
On a more serious note, gambling addiction has seen past borrowers miss repayments, incur cash advance fees on their credit card or go into overdraft.
Late repayments, credit card overdraft and excessive applications for loans or credit cards are all ways to diminish your credit score, and ultimately borrowing power.
This could significantly reduce your options when it comes to buying, leaving you with a smaller credit limit, a higher interest rate or no loan approval at all.
Words by Michelle Elias
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