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Buy Now Pay Later will affect your mortgage application

Buy Now Pay Later accounts have exploded in popularity over recent years. However, many consumers don't realise these accounts have an affect on their mortgage application.

What is Buy Now Pay Later?

Buy Now Pay Later companies include Afterpay, ZIP, Klarna, LayBuy and Genoapay. These companies allow you to purchase and receive a good/service now through an instalment of repayments instead of a lump sum.


The Pros and Cons of Buy Now Pay Later


Pros: Allows you to make purchases in instalments rather than a lump sum. This means you'll have more cash in the meantime between repayments. Sometimes these companies get discounts/sales offered when you purchase using their service.


Cons: The biggest being it does increase spending temptation and, encourage people to purchase NOW rather than practicing good saving habits.


Managing multiple Buy Now Pay Later accounts and purchases can get confusing, keeping up with how much is being debited when can lead to missing payments which negatively impact your credit score.


Does Buy Now Pay Later affect your mortgage application? - YES


Each Buy Now Pay Later account will have a credit limit - just like a credit card. This limit is taken into account when you apply for a mortgage.


This will reduce the amount you can potentially borrow as the bank take your maximum expected repayments into account - even if your balance is zero.


The bank does this to ensure responsible lending.


Should I use Buy Now Pay Later if I want to buy a house?


Ultimately, you can still get approved if you have these accounts. However, it's important to note this will impact how much you can borrow and your account conduct - how you meet repayments, if you rely on these for purchases, don't save money each pay - will impact the banks confidence in lending to you.


Instead of getting into the habit of using these companies and spending more than your budget, it might be beneficial to practice saving and delaying these impulse purchases.


Want to know more?

Check out the video below or, contact our team to have a chat:

https://www.thelendingteam.co.nz/contact-disclosure




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