How mobile contracts & BNPL loans can impact your mortgage

This week, we navigate the complexities of mortgage affordability and delve into how long-term financial obligations, such as Buy Now, Pay Later (BNPL) loans and mobile phone contracts, can influence the amount a lender may be willing to lend you.

The Impact of Financial Commitments on Borrowing Capacity
When assessing your eligibility for a mortgage, lenders take a comprehensive look at your financial profile, which includes all ongoing commitments that might affect your ability to meet monthly mortgage payments. This evaluation isn’t limited to obvious debts like loans or credit card balances but extends to more commonplace expenses like mobile phone contracts.

Example: Multiple Mobile Phone Contracts
Consider the scenario where you have multiple mobile phone contracts under your name—perhaps one for yourself and another for a family member. While this might seem like a minor detail, to a lender, each contract represents a fixed monthly outlay that reduces the amount of income available to cover mortgage repayments.

For instance, if each contract costs £40 per month, and you have three contracts, that’s £120 each month accounted for before considering other expenses or debts. This can impact the mortgage amount you might qualify for, as lenders apply formulas to ensure you can comfortably manage your loan alongside your existing commitments.

Buy Now, Pay Later (BNPL) Loans
Similarly, BNPL schemes, while offering the convenience of deferring payments for purchases, can add to your debt load. If you opt for a BNPL plan for a significant purchase, such as a £500 washing machine split into multiple payments, this commitment is factored into your monthly outgoings, much like a traditional loan.

Even if the interest is zero, the principal amount still counts against your monthly budget as assessed by lenders.

How We Can Assist You
If you’re concerned about how your financial commitments might impact your mortgage options, our team is here to help. We can provide personalised advice and strategies to improve your mortgage affordability, ensuring that you’re in the best position to secure your home loan. And with mortgage rates coming down now is an excellent time to consider your property purchase or remortgaging options.

Get in touch now on 0208 364 3444 alternatively click here to schedule a free consultation call.