How Does My Overdraft Affect a Mortgage Application?

Worried about a short-term overdraft impacting your credit report during a mortgage application? Here we explore the importance of overdraft debt and the point at which a lender might start to worry.

About your mortgage

Error: Yearly income income must be between £1 and £10,000,000.

Error: Regular bonus must be between £1 and £10,000,000.

Based on your yearly income, you may be able to borrow:

£0

Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

£0

Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

£0

Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

This calculator is an estimation of how much you could borrow. If you’re ready to take out a mortgage, speak to a Revolution brokers to see what options are available.

How Does My Overdraft Affect a Mortgage Application?

Having pre-existing debts can seem like an obstacle when looking to apply for a mortgage - but it isn't necessarily a reason to be turned down for further lending!

Revolution Brokers often talk with clients who are worried about having an overdraft, and whether that will damage their chances of being approved for the mortgage they need.

In this guide, we'll discuss reasons that a lender might reject a mortgage application due to an overdraft, and what sort of factors go into making this decision.

For dedicated support with applying for a mortgage alongside an overdraft or other borrowing, give us a ring on 0330 304 3040, or drop us an email to info@revolutionbrokers.co.uk.

I Have an Overdraft - Can I Still Get a Mortgage?

Overdrafts are a common form of occasional borrowing, and many people have an overdraft facility and successfully apply for a mortgage.

In general, an overdraft in itself isn't likely to be an issue but, of course, a lot depends on the overall picture of your credit, and how extensively you rely on an overdraft to shore up gaps in your income.

Lenders will consider several criteria when deciding whether to lend:

  • Affordability - if you have a large overdraft, or seem to be struggling to keep within your available balance some of the time, it could indicate affordability issues. Affordability assessments look at your income, outgoings, and debts to determine whether you can reasonably afford to keep up with your mortgage repayments.
  • Agreed Overdrafts - where you have an approved overdraft facility and use it from time to time, this is unlikely to have a significant impact on your mortgage application.

A mortgage provider will consider how often you use your overdraft, to what extent, whether you have multiple overdraft accounts, and whether you have been charged for using an unauthorised overdraft facility.

Will It Impact my Mortgage Application if I am Using my Overdraft?

You might potentially find that if you are usually in your overdraft or have multiple overdraft accounts, this might impact your debt to income ratio.

Again, it all depends on how heavily in debt you are, and to what extent you use your overdraft to cover general living expenses.

Having an overdraft facility that you use rarely, or sometimes dip into, probably won't indicate an affordability issue, but being always in debt could mean a lender needs to look at affordability a little more closely.

Should I Close Unused Overdraft Accounts Before Applying for a Mortgage?

Should you have a large overdraft facility that you don't use, then yes it may be worthwhile to close the facility before applying for a mortgage.

This works on a similar basis to credit cards. Even if you do not use the facility, there is potential that you will. Therefore your debt to income ratio and expandable income might change to the extent that it impacts your affordability assessment.

Most lenders work on the assumption that unsecured debt is repayable at 3% of the balance per month. Therefore, if you have a £10,000 debt, or even in some cases debt facilities of £10,000 that you aren't using, a 3% per month provision, in this case, £300 may be deducted from your income and change the maximum mortgage you are eligible for.

Can I Get Approved for a Mortgage if I Have a Student Overdraft Account?

You certainly can, yes. Most students have some grants, loans or borrowing. While a lender will need to include any debt in the affordability assessment, this won't be a primary reason for mortgage rejection.

What Happens if I Have Unauthorised Overdraft Charges and Apply for a Mortgage?

Unauthorised overdraft charges are less standard, and many types of debit account will not permit a payment to be made if you do not have an agreed facility.

However, where they do happen, it can be more serious than using an agreed overdraft facility, since it represents an inability to cover your living costs within your means.

Lenders will usually ask for at least three months of bank statements, so you must declare unauthorised overdraft charges since they will see this information in any case.

Should you have used an unauthorised overdraft once, it may be disregarded as a one-off event that isn't likely to recur.

Can I Draw Bank Funds on my Overdraft Towards a Mortgage Deposit?

No, generally a lender will not accept a deposit that has been financed by other unsecured lending.

The most common form of deposit is in cash savings, or a gift from a close family member - although some lenders will accept other deposit sources, give us a call if you're looking to get a mortgage with a different source of funds.

Expert Advice on UK Mortgages and Overdrafts

Contact the business loan broker team on 0330 304 3040 or via email at info@revolutionbrokers.co.uk to discuss your mortgage eligibility in light of any other debts, including an overdraft balance.

We can advise the best courses of action for your circumstances and direct your mortgage application to the right lenders who we know will be able to provide the borrowing you require.

Why Revolution Brokers?
  • Whole of market brokers

  • Mortgage that suits you

  • On time customer support

Further Reading

Latest Blogs

10 Feb 2022
Do I Qualify for First-Time Buyer Status?

Do I Qualify for First-Time Buyer Status? Working out whether or not you are a first time buyer may seem obvious - but there are plenty of scenarios where your position isn't clear! Examples might include: New buyers who have inherited a property they rent out. Buy-to-let investors that have never purchased a residential hom..

26 Jan 2022
How Does a Remortgage Application Work?

Most homeowners know that remortgaging means switching a mortgage from an existing lender over to a new deal. However, the process isn't always obvious. If you're on a fixed-rate deal, you'll want to get ahead of the end of the term to avoid being shuffled onto a higher standard variable rate where your interest costs will undoubtedly ..

17 Dec 2021
Understanding Lender Risk on First-Time Buyer Mortgages

Finding a great mortgage as a first time buyer can feel like an uphill struggle, with a larger proportion of applicants being turned down than a year ago. Around 20% of first-time mortgage applicants are rejected, usually because of the lender risk associated with their loan. Today, Revolution Brokers explains the highest risk facto..

28 Oct 2021
Pros and Cons of First Time Buyer Buy to Let Mortgages

Investing in a rental property can be an excellent way to get onto the property ladder and earn an income. However, if you haven't owned a residence before, you might find that a mainstream bank will automatically turn you down for a buy to let mortgage. In today's guide, the Revolution Brokers team explains how you can become a ren..

12 Oct 2021
Mortgage Deposit Requirements for First-Time Buyers

Buying a home for the first time is a massive step - but the deposit is often a stumbling block for first-time buyers. It can take years to save a sufficient amount or be impossible, so there are several ways to approach the problem and get your foot onto the property ladder. From April 2021, the UK government launched the new mortg..

24 Jun 2021
Why Property Auction Finance is Booming!

There is little doubt that UK buyer confidence is at an all-time high. We've recapped previously in our blogs how property market growth and prices have soared over the last few months! As we head into summer, one key area of mortgage finance seems to be expanding rapidly: property auction finance. In this article, the Revolution..

Offer!

Refer, Relax and get £50

If you refer a friend for a mortgage or any
type of finance you’ll both receive £25
each when their new application
successfully completes.

Know More!

We are proud
members of the:

FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

Ask the Mortgage Experts

Revolution Brokers understands that mortgages can be complex and confusing!

Ask us any question you might have, and one of our skilled consultants will come back to you as quickly as possible.