Could lotto and gambling affect your home loan?

What might seem to you like a harmless punt on a Friday night could have the potential to significantly impact your home loan.

Gambling can look different to everyone. Some gamblers might play the pokies at the local pub, some might buy Lotto tickets, while others might place TAB bets on horse racing or sports matches. But the goal typically remains the same: to win money. Or in some instances, an asset or an intangible reward such as a holiday.

Unfortunately, the chances of winning the lottery, or any other gamble for that matter, are very low. So, more often than not, it’s money spent with no financial return.

Not only can this make a substantial dent in your savings over time, but it could also work against you when you’re applying for, or paying off, a home loan.

How might gambling affect your home loan?

There are a number of ways gambling might affect your home loan, and it’s worth having an understanding of these well before you prepare your application, so that you have the opportunity to make any necessary changes.

1. It could reduce your borrowing power

Your borrowing power is the amount a lender may choose to lend you for your home loan. The factors that are assessed when determining your borrowing power include your income and total living expenses. If you gamble on a regular basis, the money you spend will likely increase your living expenses and therefore decrease your borrowing power.

Even if you don’t believe your gambling habits are all that expensive, you might be surprised by how quickly they may add up.

Let’s say, for example, you’ve got a weekly habit of picking up a $20 Lotto ticket and topping up your Sportsbet account with an additional $40. That totals $3120 spent gambling each year, which may be the equivalent to an extra month’s worth of living expenses for some. And over the life of a 25-year mortgage, that’s $78,000.

Just think of how much earlier you could pay off your mortgage if you put the money towards that instead.

2. You may sacrifice your savings

The money you spend gambling could instead be put into savings towards your house deposit. If you consider the above figures, this could mean getting the keys to a place of your own months, if not years, sooner.

One other thing to consider is that for some, gambling can escalate into an addiction, which could lead them to chip away at whatever savings they already had, and worse still, get themselves into a debt spiral.

3. It might look unfavourable on your bank statements

When you apply for a home loan, lenders are required to comply with the Australian Securities and Investments Commission’s responsible lending conduct obligations as part of their approval process. What this means is that the lender is responsible for ensuring, to the best of their ability, that the loan you are applying for is suitable for you.

One of the documents that’s assessed as part of this process is your bank statement. This can tell the lender a lot about your spending and saving habits, and give them an indication of whether you may be able to comfortably meet the repayments of the mortgage you’ve applied for.

Recurring gambling transactions on a borrower’s bank statement can be a red flag to lenders and could lead to the home loan application being rejected due to the perceived risk.

Lenders typically require several months of bank statements with your home loan application, so the sooner you get on top of your habit, the stronger your application may be.

It’s also worth noting that even if you’re taking cash out to gamble in an effort to rid your bank statement of evidence, lenders are still likely to want an explanation for large cash withdrawals occurring on a regular basis.

4. It could cause you to miss repayments

If your gambling habit is serious, it could put you in a position of financial strain from routine overspending. Which means that even if you already have a home loan, you could still be putting it at risk by missing repayments that you consequently can’t afford.

Where to go for help

It’s important to remember that there is help available if or when you need it. There are professionals who can assist you with the each of the following circumstances:

• When you need help with a gambling addiction – If you feel that you lack control over your urge to gamble, you may have a gambling addiction. Gambling Help Online is a government funded counselling and information service that provides online, telephone and face-to-face support for those who need help to rein in their habits.
• When you need help getting out of debt – If gambling has put a strain on your finances and you feel you would benefit from some professional advice, consider reaching out to the National Debt Helpline to access free counselling to resolve debt issues.
• When you need help preparing your mortgage application – And finally, if you want help ensuring your home loan application will put you in the best possible position for approval, you could chat to a mortgage broker. Brokers are industry experts who can give you advice and guidance based on your own personal circumstances.

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