When lenders ask for your bank statements, you can expect them to look for a wide range of things. However, their main goal is to assess whether you are the kind of person who handles money responsibly and is likely to keep up to date with their mortgage payments.
In recent months one question is being asked by applicants speaking with one of our Mortgage Advisors in Liverpool: “do gambling transactions look terrible on my bank statements”.
Whether you have an annual bet on the grand national or regularly use the internet betting sites. Clearly there is nothing illegal about properly licensed gambling.
Many people can see gambling as a mainstream hobby or pastime similar to many others. Still, it shouldn’t get forgotten that even the gambling advertisers urge customers to “please gamble responsibly” and this is the key to bear in mind when applying for a mortgage.
Consequently, whilst it is not a lender’s job to tell you how to live your life, how to spend your money or indeed to moralise on the ethical rights and wrongs of gambling, they do have a duty (underscored by mortgage regulation) to lend responsibly.
Suppose lenders need to prove to the regulators that they are making sensible lending decisions. In that case, it isn’t entirely unfair of them; therefore, to expect the people to whom they lend to adopt a similar approach when it comes to their finances.
Think about it. If you were lending your own money. Would you lend it to the applicant who gambles or the one who doesn’t?
As mentioned above, it is not illegal to gamble so just because you have the odd gambling transaction on your bank statements it doesn’t automatically mean you will get declined for a mortgage.
However, the lender will consider whether these transactions are reasonable and responsible. Thus they will mainly look at the frequency of these transactions, the size of the transactions about the person’s income, and the impact upon the account balance.
If these transactions are infrequent small amounts that make no significant impact on a regular credit bank balance, then they are not likely to be regarded as necessary.
However, if you bet most weeks or you get overdrawn the lender continuously, therefore, expected to see that as being irresponsible and decline your application.
As we’ve seen, essentially lenders are looking at your bank statements to show how you manage your money and to help them establish whether this gives them either the confidence that you are financially sensible or the evidence that you are not.
Remember, lenders are financial institutions that, either directly or as part of a wider group, often sell current accounts, overdraft facilities credit cards and personal loans, so understand that these things can all play a considerable role in prudent financial planning.
The key for a mortgage applicant is how these facilities get managed. For example, having an overdraft facility and occasionally using it, is not inherently a bad thing; regularly exceeding the overdraft limit – not so good.
Consequently, lenders will look for excess overdraft fees or returned direct debits because these would generally show that the account is not being well conducted
Other things to look out for include credit transactions from payday loan companies; “undisclosed” loan repayments (i.e. if you said on the application that you have no other loans but there appear to be regular loan payments, this could be a problem).
They would look out for any missed payments; finally, they might also consider how much of a typical month get spent overdrawn – namely if you only go into credit on payday and for the rest of the month are exaggerated, how sustainable is this mortgage?
The simple answer is – be sensible and, if possible, plan. Typically, a bank would ask for up to three months of your most recent bank statements.
These will show your salary credits and all your regular bill payments. Thus, if you know you’re likely to want to apply for a mortgage in the not-too-distant future. Try to make sure that you avoid any of the above pitfalls.
Take a break from gambling for a short while. Then work on presenting your bank account in the best possible light.
Your mortgage broker can help you as some lenders may ask for fewer bank statements than others. Or indeed some may not even ask for them at all.
However, even these lenders would reserve the right to request bank statements in certain circumstances. So your best bet is to be as prudent as possible in the run-up to any mortgage application.
Remember, if you do gamble, please gamble responsibly!
If you are a first time buyer in Liverpool who doesn’t know a lot about mortgages. You should get some specialist mortgage advice from a Mortgage Advisor in Liverpool.
We can guide you through the whole mortgage process and help you with your application. To get you on track so that lenders will be impressed.