Your Banking Habits Could Be Costing You a Mortgage - Here’s Why.
When you're trying to buy a home, having a deposit saved up is just one piece of the puzzle. Banks also pay close attention to how you handle your everyday money. As a Mortgage Adviser, I often see people with good incomes and healthy deposits still struggle to get loans because of how they've been managing their bank accounts.
What Is "Bank Account Conduct"?
Bank account conduct simply means how you manage your everyday banking. When you apply for a home loan, banks will look at your last 3-6 months of bank statements to see if you're good at managing your money.
They want to see that you:
Don't go into overdraft without permission
Pay your bills on time
Save money regularly
Spend responsibly
Don't have payments declined because of insufficient funds
Why Banks Care About Your Banking Habits
Banks need to make sure you can afford to repay your home loan not just now, but for years to come. Your everyday banking gives them real evidence of how you handle money.
If your bank statements show poor money management, banks worry you might struggle with mortgage payments later. On the other hand, if your statements show you're organised with money, banks feel more confident about lending to you.
Banking Behaviours That Worry Lenders
1. Declined Payments
Having payments declined because you don't have enough money in your account is a big red flag. Common examples include:
Insurance payments
Memberships
Bank fees
Power and water bills
Even one declined payment can concern lenders, while several might seriously hurt your loan application. Missing payments can also reduce your credit score, another tool lenders use to assess your suitability for a home loan.
2. Unauthorised Overdrafts
Going below zero in your account (without having an overdraft arrangement) shows poor planning. Banks see this as a sign you might struggle to live within your means.
3. Inconsistent Spending
Frequent gambling transactions, large cash withdrawals, or unpredictable spending patterns suggest you might not manage money consistently.
4. Using Short-Term Loans Too Often
Regularly using services like Afterpay, payday loans, or maxing out credit cards suggests you might be struggling with money, which worries lenders.
Six Simple Ways to Improve Your Banking Habits Now
1. Create a Separate Account for Bills
Set up one account just for your regular bills and expenses. Work out how much all your monthly bills cost, and make sure this account always has enough money before spending on other things.
2. Schedule Automatic Payments Wisely
Arrange for all your regular payments to come out soon after you get paid. This ensures the money is there when needed. Use calendar reminders for irregular bills.
3. Keep a Safety Buffer
Try to always keep at least $500 extra in your account for unexpected expenses or timing issues with payments.
4. Check Your Accounts Regularly
Look at your bank statements weekly to spot and fix any problems before they affect your record. Most banking apps now alert you when your balance is low or when payments are coming up so make sure this setting is turned on in your mobile banking app.
5. Reduce the Number of Credit Cards and Overdrafts
Having too many credit cards or overdraft facilities makes it easier to get caught short. Consider having fewer accounts and closing ones you don't really need.
6. Start Good Habits Early
Begin showing good money management at least 3-6 months before applying for a mortgage. This matches the timeframe banks typically look at when reviewing your application.
What to Expect During the Home Loan Application Process
When applying for a home loan, you need to be ready to provide:
The last 3 months of statements for all your bank accounts
The last 6 months of credit card statements
A list of your regular monthly expenses
Evidence that you can save money regularly
Banks will look through these documents to understand not just what you earn and spend, but how responsibly you manage your money day-to-day.
How a Mortgage Adviser Can Help
If you've had banking issues in the past, working with a Mortgage Adviser can be very helpful. We can:
Look over your bank statements before submission to find potential problems
Help explain past issues to lenders
Suggest banks more likely to approve your situation
Present your application in the best possible way
Recommend specific improvements to your banking habits before applying for a home loan
A knowledgeable Adviser might help you get approved even if your own bank has said no, as different lenders have different requirements.
Setting Yourself Up for Success
Good banking habits create a strong foundation for your home loan application. By showing you're responsible with money, you not only improve your chances of getting approved but might also be eligible for better terms.
Maintaining good banking habits isn't just about getting a mortgage - it's about developing money skills that will help you throughout your journey as a homeowner. Remember, how you handle your everyday banking tells lenders a story about how you'll handle a mortgage.
As a Mortgage Adviser, I understand what lenders are looking for and can guide you through the entire home loan process by helping with:
A personal assessment of your financial situation
Advice to improve your banking habits
Access to multiple lenders with different requirements
Expert presentation of your application to the lenders
Support throughout your home buying journey
Don't let poor banking habits stand between you and your new home. Get in touch for a friendly chat about your mortgage needs and how we can help you get the best possible outcome for your home loan application.
