Using Klarna is often a great way to make payments manageable, but it’s important to understand whether or not using Klarna, or any other buy-now-pay-later (BNPL) services will affect your mortgage application.
We’re here to clear up all of your questions regarding Klarna and how it can affect mortgage availability; including how using Klarna affects your application, and what to do if you are worried or confused about using Klarna and qualifying for a mortgage.
Using Klarna won’t outright stop you from getting a mortgage, but it might make some lenders question whether you actually have the funds to reliably pay your mortgage consistently.
Klarna, or other BNPL services are designed to break down payments into instalments, making payments more manageable, and allowing you to spread the impact of big financial commitments over time.
When considering to what extent Klarna may affect your mortgage, you should consider things like:
- How often you use Klarna
- Whether you have any outstanding or unpaid Klarna payments
- Whether your credit score has been affected by Klarna
- Whether you consistently make payments on time
Lenders usually run mortgage credit checks before giving you an offer. Having many outstanding BNPL payments can increase your debt load, in turn making it more difficult to qualify for a mortgage.
How using Klarna impacts your mortgage application
Mortgage lenders usually check what’s known as a ‘debt-to income ratio,’ which is essentially the percentage of your monthly income which goes towards debt repayments. Having a high number of Klarna payments each month can damage this ratio, making it more unlikely you’ll be offered favourable mortgage rates.
This said, if you manage your Klarna payments such that you can prove you’re consistent in meeting deadlines, and that you don’t excessively use such services, this could actually work in your favour with some mortgage lenders, particularly if you’re open and honest about your financial situation.
Klarna can affect mortgage applications, whether you’re a first time buyer, or have previously had mortgages.
Using Klarna when trying to secure a mortgage application is actually similar to any other form of payment management, in that it’s all about how you manage and stay on top of finances. Mortgage lenders often simply want to be able to prove that you are able to consistently stay on top of your payments, and that you’ll be able to continue this with mortgage payments.
When using Klarna isn’t an issue for your mortgage application
Using Klarna generally isn’t an issue for your mortgage application if you’re careful to manage your spending and your finances:
- Monitor your credit – If you regularly use BNPL services, it’s a good idea to regularly monitor your credit score, as well as working to increase it. A bad credit mortgage can lead to higher rates.
- Avoid using excessively – Accruing too much monthly debt through buy now pay later schemes is best avoided. Try to limit your Klarna use.
- Make payments on time – Avoid late payments at all costs. These may be marked on your credit record and can be a big red flag for lenders.
- Keep low balance – If your Klarna balance is consistently low, you’re much more likely to be offered a favourable mortgage deal.
Essentially, as long as you’re careful not to accumulate much debt, and you’re not regularly using Klarna for large payments, it’s unlikely to have a significant impact on your mortgage chances.
What to do if you are worried about Klarna and qualifying for a mortgage