That Home Loan Hub
Welcome to That Home Loan Hub, your ultimate guide to mastering the world of home loans and property. I'm Zebunisso Alimova, here to simplify the complexities of real estate and provide you with expert insights and the latest trends.
Whether you're a first-time homebuyer, an experienced investor, or simply curious about the property market, this podcast is for you. Join me each week as we unlock the secrets to property success and help you make informed decisions. Let's dive into the world of property together!
That Home Loan Hub
Khounch Cares Ep #4 - Afterpay and Home Loans: The Hidden Connection That Could Cost You
Navigating the path to homeownership involves more financial considerations than many Kiwis realize. While you're busy saving for a deposit and checking interest rates, something as seemingly innocent as your Afterpay account could be silently working against you.
We dive deep into the world of Buy Now, Pay Later services – those convenient, interest-free payment options that have revolutionized how we shop. From Afterpay and Laybuy to ZipPay and newer entrants like Genopay and Klarna, these services have become ubiquitous in our daily spending. But here's the kicker: banks and mortgage lenders don't see these services as benign conveniences; they view them as debt commitments that directly impact your borrowing capacity.
The reality might surprise you – even if you're diligently making payments and never incurring late fees, those regular BNPL transactions appearing on your bank statements tell lenders a story about your financial management. When these services are being used for essentials like groceries (yes, that's happening now!), it raises serious red flags about budgeting habits. We share practical advice on how to manage these accounts when applying for a mortgage, dispel some common myths about timing, and explain exactly what mortgage advisers can do to help present your application in the best light. Whether you're a devoted Afterpay user or occasionally dip into BNPL options, understanding their impact on your homeownership journey is essential knowledge for any aspiring property owner. Ready to make sure your shopping habits aren't derailing your property dreams?
Kia ora and welcome back to Kunsh Shears today. Hello Kunsh Kia ora, everybody. Hello. Today we are diving into a hot topic of Afterpay, laybuy, zip and other buy now, pay later services and how they affect your chances of buying a home Now. Buy now, pay later is super convenient, but could it be quietly sabotaging your mortgage application. Let's break it down. So, conch, let's quickly cover how this facility like Afterpay actually works.
Speaker 2:Well, buy now, pay later. Allow you to split payments into small installments, interest-free. Unlike credit cards, they don't charge interest, but they have late fees. Services in New Zealand include Afterpay, layby, now ZipPay and Whom Wow, yeah, so there's a few out there, lots of selections, and I think there's also Genopay and Klarna. I think I've seen Klarna around, yeah, a few new ones popping up as well. We've seen some leave the market as well, but some also coming on board.
Speaker 1:Do you use it yourself? Do you have Afterpay?
Speaker 2:No, okay.
Speaker 1:I close them all down.
Speaker 2:Once I realized it affects your borrowing capacity, I kind of closed them all down.
Speaker 1:Yeah, so here are where things get interesting right for clients and listeners. How do banks actually view buy now, pay later usage on the servicing calculations?
Speaker 2:Yeah, so buy now, pay later, is considered a form of debt. So even though it's interest free, lenders review it as a commitment. They can see it coming out of your bank statements. So frequent transactions will lower your borrowing capacity for a loan, for a loan.
Speaker 1:Yeah, and it's also not really a good sign, because if you're using a lot of those facilities, it looks like you're living paycheck to paycheck. Yeah, so you're not actually budgeting for things properly, you're not putting money aside. But you know what's scary is like? I see those facilities now advertised through things like supermarket grocery shopping, yes, right and deliver easy. Yeah, you can do afterpay?
Speaker 2:Yeah, people are using afterpay to purchase their groceries.
Speaker 1:Which is opening up for the temptation of let's just not budget, yes, let's just, you know, go out, buy whatever we want and just put it on afterpay, and you're just digging a bigger hole for yourself.
Speaker 2:That's how I see it personally and there's impacts on your credit score as well. With those, buy now, pay later.
Speaker 1:Yeah. And look, guys, it's not the end of the world. If you do have it right now Like there are some people saying out there that you should not have any facilities for at least six months before applying for a mortgage but not necessarily the truth we can put it as part of your application and say to the bank look, by the time they buy a house, they will be able to shut it down. Yes, yeah absolutely.
Speaker 2:It's not going to stop an application from going through or anything like that. It's just the level of borrowing that you might be able to not borrow as much as you want.
Speaker 1:Yeah, correct. So remember, guys, this is not a financial advice. This is us just sharing some tips. But one of the other tips is basically, if you do want to keep it open, make sure you've paid it all off or you're not paying late fees, because that just adds up.
Speaker 2:Yep, keep your full payments, keep discipline with those payments, so that just shows good management of it. And then, yeah, we can still put application through with those buy now, pay later limits.
Speaker 1:Yep, and we've helped plenty of clients to get ahead in life while still using those facilities. So that's not the end of the world. But if you've got your own thoughts on this, message us and comment below or text us, and we should be able to get your thoughts on it. So don't forget, you can find us on Facebook, youtube and Instagram, and we're here to help.