There are plenty of payments to avoid coming up on your bank statement or credit card bill when looking for a mortgage. The charges to avoid range from late fees to missed payments and can be red flags to any lender. At the very least, extra payments can lead to more questions on your mortgage application, higher interest rates and, in many cases, a rejection of your mortgage.
A mortgage lender is looking for sound financial practices when looking into your ability to repay the loan. They want to know you are good at managing the monthly income and you will pay back the mortgage over the term of the agreement.
There is no point in frontloading the bank account with cash today. The time to start controlling your finances is months or years before making a mortgage application. The lender will want to see financial sense from the borrower, not money flying here, there and everywhere with you only just making it to the end of every month.
At MortgageOne, we know from experience what should and shouldn’t be on your financial statements when applying for a mortgage, so we put this article together to put you on the right path to a successful one.
Payments not to have when looking for a mortgage
The payments not to have when looking for a mortgage are many. Not having them show you know how to handle money and, more importantly you can manage your finances from one month to another.
The last thing the mortgage lender wants to see are payments flying out of your account, with little sense of what is happening.
Types of payments to avoid when looking for a mortgage:
Overdraft fees are not unusual on anyone’s bank account, but what a mortgage provider will not want to see are high overdraft fees that appear regularly on your statement.
Excessive use of an overdraft indicates poor money management or that you are not earning enough for your lifestyle.
The late payment of credit card bills is another big no-no for any mortgage lender in Ireland. Not only does a late payment show you are not great with your money, but it also means another drain on your income and higher charges.
Always pay your credit card bill on time and keep its use to a minimum if possible.
High credit card bills should never be part of your mortgage application. The high bill shows you are using the credit card too much and more than likely living beyond your monthly income.
Avoid using a credit card when applying for a mortgage, and if you do, pay the monthly balance in full.
Missed loan repayments can be the death of your mortgage application. Even if you have a good excuse for one missed payment, a pattern of missed payments shows poor money management and that you are a considerable financial risk.
Honour your loan repayments in full each month and, if possible, pay a little extra against the loan.
Too many loan repayments will appear on your bank statement like a series of red flags and raise concerns with your mortgage lender. Why are you taking out so many loans and what are you doing with your money will be asked when applying for the mortgage.
Keeping your outgoings under control and avoiding the need for small loans will help your mortgage application be a successful one.
Bridging loan payments, even if you meet the monthly amount, can be high and may raise questions as to why you need them. Borrowing money through a bridging loan should be a last resort and may make your mortgage lender think twice about your application.
You should only take out a bridging loan when necessary and repay the borrowed amount as soon as possible.
Gambling payments will show up on your bank account or, worse still, on your credit card bill and may show a worrying pattern of behaviour to the mortgage lender.
The gambling payments may indicate you have an addiction problem and, at the very least, that you could be untrustworthy.
Close any gambling account well before you make a mortgage application and put your money into a savings account if possible.
Cryptocurrency payments, like gambling fees, are not a great look when applying for a mortgage in Ireland. Cryptocurrency is another form of gambling, and though the returns can be high, the value of Bitcoin can drop dramatically and affect the money invested.
Keeping your bank account as clean as possible can only help your mortgage application. Too many outgoings can mean risky behaviour and put the lender on alert.
Missed direct debits such as utility bills and other regular payments like car insurance instalments are a big source of concern for the mortgage provider. A missed payment happens because there is not enough money in your account to cover it, showing poor financial management.
Avoid too many direct debits on your current account, but always meet the monthly amount due.
High bank fees indicate a lot of activity on your bank account, which is rarely good news for a mortgage lender. Your bank account will attract high fees for cash withdrawals, loan payments, missed payments and other activities, which indicates a messy account with many danger signs.
Keeping your bank account in order is the number one rule when thinking of applying for a mortgage. High bank fees show high levels of activity and poor money management
Your bank statement will always show payments, both outgoing and incoming, to the account. The mortgage lender will expect to see payments and that you are managing your account within your financial limits.
What your mortgage provider will not want to see is late payments, missed payments and too many payments on your monthly bank statement.
Keeping your bank account tidy will be a huge bonus when looking for a mortgage.
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