Does An Overdraft Affect Your Mortgage Application?

Many of us have an arranged overdraft set up on our main bank account (usually a `current account`) which can give you simple access to borrowing. These can be very useful when you are a little short on money occasionally.

However overdrafts are designed as short term credit and are not cheap. If you are continually in your overdraft it is a sign that you are struggling with cashflow on a regular basis. This is not conducive to getting your mortgage application approved as lenders need to make sure you can afford the additional repayments associated with your mortgage. It is probably better to consider ways of restructuring your existing debts or avoid using an overdraft for at least 3 months before you make a mortgage application.

Your overdraft will be considered by lenders when you enquire for a mortgage. They will review your overdraft and if you are in the red for long periods of time then this may well have a negative impact on your mortgage application - and may in some cases result in you being turned down for your mortgage. In any case the lender will need to take into account charges you are incurring with regards to the overdraft and this can reduce the amount you are able to borrow via your mortgage.

Does an overdraft affect credit score?

An arranged overdraft will have little or no negative impact on your credit score / credit rating if you are not using it but have the facility. In fact there may be a positive impact on your score because it shows that your account providers deems you a good risk to offer you an overdraft in the first place. However as mentioned earlier when you start regularly being overdrawn this can be quite negative. Especially if you go over your overdraft limit or into an unarranged overdraft this will not only result in penalty charges from the bank but also have a negative effect on your credit rating and any potential mortgage application.

Current Accounts with an overdraft are designed to provide you with full day-to-day banking facilities, easy access to your money and a useful authorised overdraft facility.

Can you use your overdraft for a mortgage deposit?

In most cases the answer is likely be `no`. The mortgage provider is looking to lend you money and therefore seek a good track record in terms of your cashflow and a limited amount of other debt. Lenders would prefer to ensure that you have a decent deposit in place and not encourage you to take on extra debt, which is likely to stretch your affordability. There is some history behind this as some mortgages in the past used to allow borrowing above and beyond the property value (e.g. Northern Rock`s together mortgage) and this caused problems for borrowers. This said their may be ways to restructure your finance to ensure you have them organised in the best way to ease your cashflow whilst still servicing your debts. Having 30 years experience in the mortgage sector has given us access to a large number of different finance options. We will work with you to ensure you are advised upon the most suitable option for your individual circumstances.

We try that little bit harder to get you the best remortgage deal - fast & for any purpose

Whether you need an adverse poor credit remortgage or a high score clean credit file mortgage we can supply a remortgage that can be for debt consolidation, lower repayments, home improvements etc.

Choosing the right mortgage plan is an important decision. We at First Choice Finance strongly believe that personal attention should be given to each of our potential applicants. We offer competitive rates, terms and creative tools catered to suit your individual needs.

Our mortgage advice team is designed to help both those people who may have had credit problems and may not be able to obtain mortgages from conventional sources as well as straigtforward fast track mortgage advice solutions.

Why should you finance your home through the First Choice Finance lender panel?

You deal with professionals - Our mortgage advisers are qualified and specialise in purchase mortgages and remortgages. We know what it takes to facilitate a timely completion date and we take pride in providing a fast, personalised service to all of our clients. Whether you have already found your dream home, or are just beginning to look, we can offer advice and guidance every step of the way.

We`re very experienced in the finance sector - When you specialise like us and survive for over 30 years, it`s hopefully because you`re good at what you do. We`ve streamlined the sales process, saving you time and stress. In addition we are experts at low down payment mortgages and a wide-variety of mortgage loans that are not available on the high street.

Mortgages & Remortgages 8.4% APRC. Representative Example: Borrow £120,000 over 25 years at 5.99%, £778.86 pcm fixed for 3 years at 60% LTV. Then at 8.75%, £974.86 pcm, variable for 22 years. Total payable £286,416. Total cost of credit £166,416 (including: £985 broker fee, £999 lender fee & £164,432 interest)

Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk

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First Choice Finance is a trading style of First Choice Funding Limited of 54, Wybersley Road, High Lane, Stockport, SK6 8HB. Copyright protected.