Gambling apps such as Sportsbet and Ladbrokes are becoming more and more popular, giving punters the ability to place bets at their fingertips. However, the weekly bet you are making on your favourite footy team or racehorse could potentially affect not only your borrowing power but also your ability to get a home loan.
But what if I only gamble small amounts?
Gambling has become the latest target of banks, with more lenders now scrutinising betting habits, whether they are small or large amounts. In the bank’s eyes, hobby gambling can quickly turn into a gambling addiction so you could be red flagged and considered high risk during the application process.
This recent scrutiny on gamblers could affect a large number of borrowers, with the latest data from the Australian Institute of Family Studies finding 574,000 Australians regularly engaged in betting on sports.
Let’s dig deeper
An applicant earning the average income of $82,436 who bets $50 a week, could end up reducing their borrowing power by $32,000. Although this may not sound like much, when it comes to purchasing your dream home and negotiating a price, an extra $32,000 of leeway can go a long way. If you are gambling slightly higher, around $200 per week, your borrowing power could be reduced by up to $127,000, and that’s assuming a lender will run the risk of approving a loan.
Lenders Mortgage Insurance
In the majority of loan applications where you are borrowing more than 80% of the value of the property, lenders require you to take out Lenders Mortgage Insurance (LMI).Insurers also assess applicants based on risk, so if you gamble regularly, then they are likely to decline the application based on lenders character.
Avoiding the red flag
If you are considering applying for a home loan and regularly gamble, we suggest you review your habits and make sure this is a change for the long term. Also be wary with withdrawing large amounts of cash from ATM’s, particularly if they are within proximity to a casino or TAB. Although the cash withdrawal may be innocent, lenders will question you about what the money was for.
For further advice on how to improve your home loan application, get in touch with the team at Preston Finance and Insurance for an obligation-free chat.