In an Overdraft

Can being in an Overdraft Affect a Mortgage Application?

Discover the impact of overdrafts on your mortgage applications and how your financial behaviour can influence your dreams of owning a home.


The journey towards owning your own home can be a fascinating yet daunting experience. Your financial behaviour, especially when it involves being in an overdraft, can significantly impact your mortgage application. Let’s navigate this intricate journey together and see how we can turn the odds in your favour.


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How Overdrafts can Influence your Mortgage Application

An overdraft, in essence, is borrowing through your bank account. While it’s seen as a way to manage short-term borrowing needs, frequent overdrafts can potentially create obstacles in your mortgage application process.

The Impact of Authorised Overdrafts

There are two types of overdrafts: authorised and unauthorised. An authorised overdraft is a borrowing limit agreed upon between you and your bank, typically included in your account features. Occasional use of your authorised overdraft is usually not a problem, provided it’s paid back promptly and not seen as regular income. However, consistent reliance on it can raise red flags to lenders as it could indicate poor money management. This is especially the case if you keep going in excess of the facility.

The Effect of Unauthorised Overdrafts

An unauthorised overdraft occurs when you spend beyond the agreed limit or when you do not have an authorised overdraft in place. This could be detrimental as it indicates financial stress and could lead to hefty bank charges. Such financial behaviour is likely to affect your mortgage application negatively as it reflects unreliable money management skills.

The Role of Credit Score in your Mortgage Application

Credit referencing agencies, including Equifax, Experian, and TransUnion, compile your credit reports, which lenders use to assess your creditworthiness. Any form of borrowing, including overdrafts, leaves a footprint on your credit file.

How Overdrafts can Influence your Credit Score

If managed correctly, an overdraft will not negatively affect your credit score. However, if you frequently exceed your overdraft limit, lenders may consider you as a riskier borrower, resulting in a lower credit score.

How your Credit Score Influences your Mortgage Application

When it comes to your mortgage application, lenders assess your credit score to determine whether you’re a high or low-risk borrower. A low credit score, potentially affected by consistent overdraft usage, could lead to less favourable mortgage terms or even rejection of your application. This will however depend on the lender.

Getting a mortgage whilst within overdraft

Managing your Finances

Having a clear understanding of how overdrafts affect mortgage applications, here are some tips on managing your finances:

Building a Solid Credit History

Regularly review your credit file using free services provided by Experian, Equifax, and TransUnion to ensure all the information is accurate. Remember to promptly correct any inaccuracies, as they could adversely affect your credit score.

Overdraft Management

While overdrafts can act as a safety net for unexpected expenses, continuous usage can raise concerns about your money management skills. Aim to use overdrafts for short-term borrowing needs only, and always try to keep within the agreed limit.

Financial Buffer

Consider building a financial buffer to cover unexpected expenses instead of relying on an overdraft. This indicates good money management and financial stability, both of which mortgage lenders appreciate.

Debt Management

If you’re struggling with an overdraft or other forms of debt, seek advice from Money Helper or Citizens Advice. These organisations provide free, confidential advice and can guide you through your financial issues.

Owning your own home is a major life goal for many, and understanding the role of financial management can help you achieve this dream. With the right knowledge and resources, you’ll be well on your way to turning the key in your own front…. of customers – those that need mortgage advice. But what does having an overdraft mean for your potential mortgage application? Well, let’s delve into this.

Professional Advice

Reaching out to a professional mortgage advisor is always a good move, especially if you’re worried about how being in an overdraft might affect your application. Organizations like Citizens Advice and Money Helper provide impartial advice on a wide range of financial matters, including mortgages. You should however always speak to a professional mortgage adviser.

Clear Score and Check My File

There are numerous online platforms like Clear Score and Check My File that offer free credit score checks. Regularly monitoring your credit score can help you better manage your overdraft and other debts, putting you in a stronger position when applying for a mortgage.

Steps to Improve Your Financial Situation

Here are a few steps to improve your financial situation:

  1. Limit your overdraft usage: Try not to rely heavily on your overdraft. If possible, aim to clear it each month.
  2. Budget effectively: Manage your income and expenses so you know where your money is going. This will help you keep your overdraft in check.
  3. Monitor your credit score: Use platforms like Equifax, TransUnion, Check My File or Experian to monitor your credit score and understand how your overdraft is affecting it.
  4. Seek professional advice: Speak to a mortgage advisor to understand what lenders will be looking for when assessing your mortgage application. Platforms like Zoopla and Trust Pilot have recommendations for advisors or you can be matched with one through I NEED ADVICE.
Happy mortgage broker giving free mortgage advice over the phone



In a nutshell, being in an overdraft can affect a mortgage application. However, it’s not the overdraft itself that is the issue. Instead, it’s the way it’s used. Overdrafts are a form of credit, just like loans, credit cards, and store cards. If you consistently max out your overdraft or find yourself dipping into it more often than not, this can be a red flag for potential lenders.

Impacts of Consistent Overdraft Usage

  1. Credit Score: Regular usage of your overdraft can affect your credit score negatively. This is especially the case if you’re constantly at your limit. For a lender, this may be an indication of poor money management.
  2. Affordability Assessment: Lenders may question your ability to afford a mortgage if your account is continually overdrawn. This is assessed alongside your regular income and outgoings.

Whether you’re a first-time buyer, looking to remortgage, or interested in buy-to-let properties, understanding your financial situation is the first step to owning your own home. There are resources available to help you on this journey, from checking your credit score to understanding complex mortgage terms. Don’t let the fear of rejection prevent you from achieving your dream home.

The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.

If you are seeking advice about a mortgage, you should consult a qualified professional.

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