Factors such as credit score, debts, employment history, and spending habits can greatly affect your mortgage application. What about gambling, though? Well, mortgage lenders go through your credit card transactions thoroughly and will likely flag gambling-related transactions.
After all, the demand for this form of entertainment is still high and continues to rise. Just last year, there were over 19.3 million online gamblers in Canada, so it’s a common hobby. Currently, there are dozens of new online casino reviews that help players find the sites where they can bet and play slots, poker, and live dealer games. They attract new players and experienced gamblers with numerous promotions and bonuses. However, this can also have negative effects on your finances. If you use your bank account card at online and retail casinos, all the transactions will be visible on your statement.
So, does gambling affect getting a mortgage? Let’s discuss it in detail.
Gambling and Mortgage Applications
Before applying for a mortgage, you must consider several factors. Your credit score is crucial to even starting the process, but it includes a number of other criteria. Your income, expenses, debts, amortization period, and much more are taken into consideration. For example, your total monthly housing costs are a very important factor, and they should be below 39% of your gross household income (the gross debt service ratio – GDS ratio).
But does gambling affect a mortgage? Yes, banks and lenders check your bank statements from the previous few months. Any gambling activity in that period will be taken into account. In short, they assess your spending behavior and check if anything could affect your ability to make monthly payments on time.
Even if you’re eligible for a loan, whether you get a reasonable mortgage rate is affected by your gambling spending. While gambling isn’t the main focus of your potential lender, any debt and excessive expenses on your card will be considered a red flag.
How Banks View Betting Activity
Financial institutions and lenders don’t view gambling expenses as a positive thing; to them, this activity is regarded as a liability. This is especially true if you spend a huge chunk of your income on this.
Banks use Merchant Category Codes (MCC) as technical markers for different transactions. MCC 7995 is the code used for gambling-related payments, which include sports betting, online casinos, and lotteries. Regardless of your mortgage application, MCCs also allow banks to restrict card usage depending on their internal risk policies.
So, does gambling affect mortgage application? The answer is yes. The percentage of your income you spend on betting is taken into account when evaluating your capacity to pay off the mortgage loans. If your gambling spending is under 5% of your income, you’re considered low risk, 5-10% is moderate risk, while anything over 10% is high risk for banks.
Occasional vs. Frequent Gambling
Over 66% of Canadians have reported that they have participated in some type of gambling. However, 0.6% of the population, or around 156,000 Canadians, are problem gamblers. Online gambling doesn’t automatically mean you’re ineligible for a property loan. If you’re a casual spender, and the statements show how you are financially responsible, it won’t be a problem. However, if the spending pattern indicates you are gambling more frequently, it might result in unfavorable terms and interest rates. Also, if your bank registers a pattern of frequent betting transactions, they may decide to deny your mortgage application.
Players who bet for entertainment, sporadically, can easily be dragged into addiction if not careful. You should always stay informed when registering for a casino. While some casinos only focus on making a profit, some care about their players and their responsible gaming. For example, you should carefully read the Grizzly’s Quest casino reviews to understand its promotions and bonuses before signing up. When you gather all the data, you can make informed and smart financial decisions.
Impact on Affordability Checks
To ensure you’re eligible for a homeowner’s loan, banks perform affordability checks. These checks include asking about your budget, income, expenses, and spending needs. If they deem you can afford to take the loan and make timely payments, you pass the affordability check.
These checks are mostly based on your credit score and the length of your credit history. So, how long does gambling affect mortgage application? The lenders will assess your bank statements from the previous 3 to 6 months. Any gambling activity in that period will be visible to your bank. Then, they make assessments of whether you’re reliable for a loan and whether you’re going into debt to fund your casino account.
Reducing Risk Before Applying
Since applying for a mortgage can be a long process, and getting denied can only prolong it, you should focus on reducing the risks of being denied. There are several things you can do, from improving your credit score to speaking to a mortgage adviser. If you’re worried about applying for the homeowner’s loan, make sure to:
- Clear your debts – Pay off any debt you have to show responsibility and efficiency when it comes to finances.
- Improve your credit score – Cancel any credit cards you’re not using and pay off all outstanding debts on them.
- Ensure your credit history is clear – Check all activity and transactions in the last 3 to 6 months to find and fix any potential problematic payments.
- Stop gambling – If you’re concerned your occasional betting activity is evolving into a habit that will affect your chances of getting a loan, try to stop it entirely.
We’ve already established that gambling has an effect on getting a property loan, but how much does gambling affect mortgage application? The main issue is that you’re not going into debt. On the other hand, if your statement shows more intense and more frequent betting activities, the bank can treat you as a high-risk applicant and either deny the loan or give less favorable terms.
