Credit cards and buy now, pay later schemes may make your everyday life easier in terms of spending and receiving ‘rewards’, but to the bank these are known as a liability and can impact the amount you can borrow when it comes to applying for a home loan.

Now we know how frustrating this can be, especially if you are really good at managing your credit cards and BNPL accounts, i.e. you pay it off monthly, avoid interest etc, however the bank still sees the full limit as a liability and has to take that into account when calculating your serviceability.

It is definitely comforting knowing you have your BNPL or a higher limit on your credit card ‘just in case’, however we often don’t have them maxed out either, which means having that extra couple of grand on hand could end up costing you a significant amount when it comes to applying for a home loan.

The bank will often ask for a reduction on the limit of your credit card or to close it completely and same goes with the buy now, pater later schemes. Either way, the team at My Mortgage can look at your options before submitting your application.

Remember, your credit card limit isn’t set in stone and you aren’t obligated to keep your BNPL accounts open either, especially if you don’t use them! It’s a good idea to review these and see if you really need them. Once you have your home loan in place, you can relook to use these again.