Did you know that your gambling habits could influence your ability to qualify for a home loan?
Whether you enjoy betting on sports or races, or even playing the online pokies, there are plenty of ways you can indulge your desire to have a punt from the comfort of your own home. But if you’re a frequent gambler, could your history of spending money on gambling impact on your ability to qualify for a home loan?
The answer isn’t a straightforward yes or no. The impact a gambling habit has on your home loan application varies depending on your personal circumstances, so let’s take a closer look at how your borrowing power can be affected.
When won’t gambling affect your home loan application?
The simple fact that you like to gamble will not in itself be enough to affect your home loan application. If you’re betting a few dollars of your spending money here and there – ie, not taking out credit to do so – this won’t have any impact on your mortgage application.
Lenders and mortgage insurance underwriters assess your ability to comfortably service a loan; they don’t make any moral judgements on your spending habits.
When will gambling affect your home loan application?
There are several circumstances where gambling can present a large problem for home loan applicants. Gambling addiction is a serious personal problem that can also lead to financial issues. For example, it could cause you to miss credit card repayments, incur cash advances on your credit card or even apply for a short term loan to fund your habit. All of these factors can have an impact on your ability to obtain home loan approval.
There are other factors worth considering too, such as the fact that a regular gambling habit will most likely mean you have less of a savings balance for a deposit, which in turn can have a negative impact on your application. Accruing a large amount of personal debt will also cast doubt in a lender’s mind about your ability to service a loan. In short, if your gambling causes problems with your finances, it could definitely cause a problem with your mortgage application.
Similarly, if the money you spend on gambling represents a significant portion of your ongoing expenses, the lender or mortgage insurance underwriter may be concerned that there is a higher chance of you getting into financial difficulties and being unable to keep up with repayments. In some cases, this could mean that your home loan application is declined.
Tips to increase your chances of home loan approval
- Stop gambling. It’s an obvious piece of advice but one that’s worth mentioning. Not only will this remove any chance of gambling affecting your application, it will also ensure that you can save more money to pay off your loan.
- Separate account. If you’re worried about gambling transactions showing up on your bank statement when you supply proof of genuine savings to a lender, make sure that your gambling transactions are funded from a transaction account that is separate to your savings account.
- Get a clear savings history. Many lenders only require bank statements from the past three to six months when you apply for a loan, so if you stop gambling long enough to develop a “clean” transaction history you can improve your chances of approval.
- Pay off debt. Your debt-to-income ratio is an important factor lenders look at when assessing your home loan application. By paying off your debt and building a documented history of disciplined savings, you can greatly increase the chances of your application being approved.
- Fix your credit history. An imperfect credit history can have a hugely detrimental effect on your borrowing power, so check to see whether you can fix any mistakes or black marks on your credit file.
- Talk to a mortgage broker. A mortgage broker can help you find a home loan that matches all your requirements. Be upfront and honest with your broker about your gambling and your concerns that it could affect your application. He or she will then be able to offer advice on the most suitable lenders, as well as how you can structure your application to minimise or eliminate any negative impact from your gambling.
Gambling is just one of many factors that can affect your mortgage application; even the information you share on social media can hurt your borrowing power. With the proliferation of betting agencies in Australia’s major sporting codes, not to mention the increasing opportunities for online gambling, this issue could become a much more significant obstacle to Australian borrowers in coming years.
If you do like a punt every now and then, make sure you take the necessary steps to prevent your gambling from affecting your mortgage application. And, most importantly of all, if gambling is a problem for you, take action today and get the help you need to quit.