3 reasons Buy Now Pay Later could affect your ability to get a home loan

Buy Now Pay Later (BNPL) services are popular for splitting purchases into smaller instalments, especially in the lead up to Christmas.

But if you’re planning to apply for a home loan, it’s worth understanding how these platforms may impact your borrowing capacity.

While BNPL products can offer convenience, they can also be treated as liabilities in the eyes of lenders. Here are three reasons why frequent BNPL use might impact your ability to secure a mortgage.

Reduced borrowing power

When applying for a home loan, lenders assess your income and existing commitments to determine how much you can borrow. Regular BNPL repayments, even small ones, are often considered recurring financial obligations and may be factored into your loan assessment.

This can reduce your serviceability, the amount a lender determines you can comfortably repay. If you regularly use BNPL services, a lender may apply a buffer to your repayments to account for possible future use, which could further reduce the amount you're eligible to borrow.

Perception of financial behaviour

BNPL usage typically appears on your bank statements, and lenders review these in detail during the loan assessment process. Even if your repayments are made on time, consistent BNPL transactions can raise questions about your financial habits.

Some lenders may view frequent BNPL activity as a sign you’re relying on short-term credit to manage cash flow. This may lead them to see you as a higher-risk borrower, which could influence the outcome of your loan application.

Potential delays or extra conditions

In some cases, lenders may ask applicants to reduce or close certain debts before proceeding. If your BNPL activity is considered significant, you may be asked to clear any outstanding balances or stop using the service for a period before reapplying. This could delay the home loan process or make approval subject to conditions.

The more complex your financial profile appears, the more documentation and time may be required during the assessment process, particularly in competitive or time-sensitive markets.

What you can do

If you’re planning to apply for a mortgage in the near future, reviewing your current financial commitments, including BNPL, is a good place to start.

A qualified mortgage broker can help you compare your options.

Even if you’re not ready to buy right now, getting advice early can help you prepare for a smoother application process when the time is right.