When preparing your mortgage application, it is important that you know how to manage your bank account and understand the do’s and don’ts of using cash or card. When you do, you can present yourself at your best.
Bank Account Management when preparing your mortgage application
In terms of your bank account management it is important that you:
- Maintain a credit / positive balance where possible
- Avoid unpaid direct debits and standing orders
- If you need to venture into a minus balance / overdraft, make sure it’s an approved overdraft facility
- Avoid gambling in your accounts
- Ensure that your monthly savings is clearly demonstrated
- Make sure to pay your rent by bank transfer, not cash
- Avoid having too many accounts, as this can get messy
In the 6 months leading up to your application, be sure to keep a record of any large transactions in your bank accounts outside of your standard monthly
spend. These are likely to be queried by the lender.
It is preferable that you save a set amount each month into a savings account to demonstrate your affordability for the mortgage. If you only operate a current account and nothing else, this can be fine once the monthly build up of funds is clear to see.
Gambling should not be a regular feature on your bank statements. If you show excessive gambling on your bank statements this can be a red flag for most lenders. Prioritise the things that are going to strengthen your application, and park anything that’s going to be seen as an issue. Gambling is one of those things that you are better off keeping off your bank statements.
Finally, remember that online banks, Revolut and N26, are very much banks. So, you will be expected to provide up to 6 months statements for those accounts too.
The best way to pay for things when preparing your mortgage application
Very simply, if you are showing enough affordability for the mortgage you are looking for, how you then spend your money is entirely your business, so don’t be afraid to do it by a mix of cash or card.
Paying by Cash
It is often suggested that you shouldn’t use your card, and that you should withdraw cash from an ATM and live off it, rather than using your bank card. The lender then can’t see what you’re spending your money on. This, however, may raise concerns and create questions … are you repaying a loan to a friend / are you gambling / are you paying childcare in cash / etc., and are you trying to hide it?
Your cash spending could be completely above board, and that is fine … so why go to the effort of doing it all by cash to disguise it?
Ultimately, there is nothing fundamentally wrong in withdrawing and spending cash. What will look unusual, though, is if the only activity on your account is your salary going in, rent and bills going out by bank transfer, and all other discretionary spend happening via cash withdrawals.
Paying by Card
There is nothing wrong with tapping your card, using chip and pin, withdrawing cash from an ATM on a Saturday night out, or using your card in a pub at the weekend.
This is all normal life spending, and the lenders do like to see this. Yes, the lender will have more detail on the way in which you spend your money, but what’s the harm if there is nothing to hide?
For the full set of tips on making yourself mortgage ready, download our Top Tips for First Time Buyers guide – 17 pages of knowledge from years of helping people get the mortgage they want.