The Rise of Buy Now Pay Later

Have you ever heard of Buy Now Pay Later (BNPL) services? They’re becoming super popular because they let you buy things now and pay for them later. It’s like getting instant gratification without having to fork over the cash right away. But did you know that using BNPL could affect your chances of getting a mortgage in the future?

How BNPL Can Affect Your Mortgage Application

When you apply for a mortgage, lenders look at a bunch of things to decide if you’re a good candidate. One important factor is your debt-to-income ratio, which shows how much debt you have compared to how much money you make. Even though BNPL purchases don’t always show up on your credit report, they can still impact your DTI ratio if they increase your monthly expenses. Lenders might see a high DTI ratio as a red flag and could deny your mortgage application.

Credit Score Concerns

BNPL transactions don’t directly affect your credit score, but if you miss payments, it could hurt your score. Late payments can lead to negative marks on your credit report, which might lower your score. A lower credit score could mean higher interest rates on your mortgage or even a denial.

Undisclosed Liabilities

When you use BNPL services, you might be racking up debt without even realising it. Some BNPL companies don’t do traditional credit checks, so you could be hiding debt from mortgage lenders. If you don’t disclose your BNPL commitments, it could mess up your mortgage application and put your approval at risk.

Long-Term Financial Impact

While BNPL might seem like a good idea in the moment, it could mess up your long-term financial goals, like buying a home. If you have a lot of BNPL debt, it might be hard to save up for a down payment or meet other requirements for homeownership.

Navigating the Impact of BNPL on Your Mortgage Application

If you’re thinking about using BNPL services, be careful and think ahead. Consider how these purchases fit into your overall financial plan and if they line up with your goal of owning a home. Make sure to make payments on time and keep an eye on your credit report to avoid any negative effects on your mortgage eligibility.

In conclusion, while BNPL services offer convenience, they can also cause problems when it comes to getting a mortgage. By understanding how BNPL can affect your financial standing and making smart choices, you can improve your chances of getting approved for a mortgage and reaching your dream of homeownership.

Article contributed by Deon Booysen, Lendi Home Loan Consultant

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