Does using a small authorised overdraft short term affect likelihood of mortgage ?

[Hdkatznahtw125sgh]

Hi

I’m looking to buy a property soon. Have a sizeable deposit. I earn 30k ish a year. I have a second job earning £5-8k a year but it’s agency so not sure if can be counted for a mortgage. One property I’m interested in with o/o (I’m in Scotland) is likely to be around 75k. The mortgage value I’d be applying for would be 30-35k, so quite small.

I have no credit cards or anything like that and according to Experian I have a very good credit score. The only loan I pay off is my student loan. However, I have a small arranged overdraft (£100)which I do occasionally go into, usually for no longer than 1-2 days. I’ve clamped down on this in recent months but if 6 months of bank statements were required it would be visible. If 2-3 months were required it would not. I’ve never been late for rent, council tax or utilities etc.

I’ve applied / got appointments to see about a mortgage in principle but am slightly concerned about this. I’ve been in my job 18 months and it’s nhs and permanent. My available savings are 62k but that’s to cover the o/o and mortgage price difference and other costs in addition to the deposit and renovations.

can anyone advise, apologies for posting here.

You will have no problem. Both me and husband have overdrafts and we're offered mortgages by each financial institution where we applied

Thanks very much x

As long as it was authorised etc then I can't see why it would be

No that won’t affect you at all. You stayed within the limit, repaid it and showed you are responsible.

Hi . As long as you have kept inside your overdraft agreement with your bank , it should be fine. No returned direct debits etc. I would stop worrying about it as you have a sizeable depisit and the risk to the mortgage lender is minimal as you are asking for quite a small mortgage. My role amongst others was to assess applications for home loans and I used to sign off on these types of loan. I am now retired , used to be a lending manager at a Bank. I wouldn’t imagine there are many differences between Scottish and English criteria. You sound like a dream customer to me. Good luck with your endeavours.

In a word no, it shouldnt affect your mortgage at all. Its such a small amount and only temporary and also its authorised so the bank are happy with you using it. Plus your mortgage is less than half the total cost of the house.

My husband was in a similar position and when we spoke to our mortgage adviser we were told that the banks are only really concerned about paying it back so if you can show a good record of using the overdraft it proves that you are a good bet.

Similarly we were advised that it was good for the credit score if you actually have and use a credit card - again the banks want to see that you can pay back credit so using a credit card and paying off in full each month shows you can manage money and are credit worthy. So for the future it may be worth applying for a credit card (once your current mortgage has been approved) and then using it regularly, but ensuring you pay off in full each month, so that the banks have another record showing your credit-worthiness.

You should be fine. It's unauthorised overdrafts/missed payments/arrangements to pay that limit your lenders.

It should be fine. Where it would be a problem would be if you continued to use it every month, exceeded the agreed amount or had a late or missed payment.

I am a broker (over 20 years) it shouldn’t make a difference but some lenders are being strict at the moment. If you use your overdraft through necessity now and are increasing your outgoings by buying a house this will look like you are reliant on an overdraft. (This could be because you save a lot), but try not to use it. But don’t panic about what was in the past as you cannot change it!

why don’t you transfer £500 from your savings into your current account. Then treat £500 as a zero balance. Meaning you never go below £500 in your account. Then your balance is always healthy even if you have an emergency.

Regarding credit cards and boosting score etc. Just ask friends for the number of a good broker and contact them, they will put your mind at rest and maybe do a soft search so you know where you are. It’s normally 3 months statements. Some lenders don’t want any statements. Nothing you have said so far concerns me btw.

Thanks everyone for your advice. I am more reassured now regarding the overdraft.

However, regarding returned payments. I have Once or twice had a DD declined, once was pre overdraft and once because two came out at once. Both were successful on the second attempt from them to take it. There’s nothing I can do about this as was in the past.

@Hannahshome I actually implemented this but for £100 but only recently so for the next 6 months I still have use of OD on my statements and 1 or 2 declined DD’s on the first attempt (Netflix and phone bill). I perhaps naively thought it was only rent council tax energy bills etc that would count.

thanks everyone for great advice, I will book with a broker

The phone bill may be on the credit file. However if it was a one off status 1 you should be okay. Get your ‘check my file’ to show the broker (its free for a short period so wait until your appointment). But use a recommended broker and explain your situation. They will then advise you and put your mind at rest.

You must not let anything else bounce. Set up your £500 buffer and check the account daily if necessary to stay above the £500. If you dip to £499 see it as you being in your overdraft and stop spending.

Thanks! The new buffer is in place

@Aidagreenwhistle thanks the trial is 30 days so I have been able to access check my file. My phone bill (though my previous one did - no bounces) doesn’t come up on it the only thing it shows is my overdraft previous usage. Unfortunately my credit score is only 713 (it was 850-900 on experien)