Getting a Home Loan – can this be impacted by using ‘Buy Now, Pay Later’ services?
‘Buy Now, Pay Later’ services seem to be readily available, with multiple companies such as Afterpay NZ, Zip, Geonapay and Laybuy offering customers the choice to buy goods now and pay them off later, over several instalments, interest-free, for a set period of time.
For many people, this is convenient, quick and easy to register for and a perfect way to get the products they are after. But does this behaviour affect the chances of you getting a home loan? The short answer is, it could.
Why is this?
Well, when some lenders are looking at your financial records and bank transactions, some would regard ‘Buy Now, Pay Later’ transactions as an alert that you’re not managing your money well. They would also look at the amount for this transaction and the frequency and mark this as an ‘ongoing expense’, even though your latest ‘Buy Now, Pay Later’ purchase has an end date. Some lenders would say once you pay off your latest purchase, there is a high chance you would then use a similar service in the future, i.e. it’s an ongoing activity, and an expense at that.
Also, some lenders, rightly or wrongly, would make some assumptions about the management of your finances. For example, if you’re making regular $200 payments for a product you couldn’t afford to pay cash for, then how will you afford a mortgage of $400,000?
Unfortunately, for those looking to secure a home loan, the scrutiny around the ability of you, the borrower, to repay the loan, is only increasing. While one ‘Buy Now, Pay Later’ transaction wouldn’t ruin your chances of getting a mortgage, if the lender sees this type of service used again and again, then you might run into difficulties. So, it’s a good idea to have paid off all ‘Buy Now, Pay Later’ accounts several months before you apply for a mortgage.
At Rapson Loans & Finance we’re independent financial advisers which means we have access to multiple lenders with different lending requirements.
Talk to us today, Want to see if your mortgage is set up the best way for you?