Can You Get a Home Loan with an Overdraft or Line of Credit?

Getting a Home Loan with an Overdraft or Line of Credit

Yes, you may be able to get a home loan if you have an overdraft or line of credit.

An overdraft or line of credit does not automatically stop mortgage approval, but it can reduce your borrowing power. Lenders may assess the approved limit, not just the balance you currently owe. This means an unused overdraft or line of credit can still affect your application if the facility remains open.

Some lenders assess personal overdrafts and unsecured lines of credit similarly to credit cards. Others calculate a repayment using the facility limit, interest rate and an assumed repayment term. Business overdrafts and business lines of credit may be assessed differently again, especially if you are self-employed or borrowing through a company or trust.

This guide explains how Australian lenders may assess overdrafts, personal lines of credit, secured lines of credit, business overdrafts, business lines of credit, unused limits, repayment history and debt consolidation, based on current policy research.

Can you get a home loan with an overdraft?

Yes, you may be able to get a home loan with an overdraft.

A lender may still approve the application if:

• the overdraft is disclosed
• the limit is manageable
• the account conduct is acceptable
• there are no recent missed payments
• there are no excessive over-limit events
• your income is stable
• your living expenses are realistic
• the home loan still services
• your deposit and LVR are acceptable
• the lender’s policy accepts the overall position

The main issue is usually borrowing power and account conduct.

Can you get a home loan with a line of credit?

Yes, you may be able to get a home loan with a line of credit.

A lender may assess:

• the approved limit
• current balance
• interest rate
• repayment amount
• whether it is personal or business
• whether it is secured or unsecured
• whether it is being retained
• whether it will be closed
• repayment history
• whether the facility is revolving

A line of credit can reduce borrowing capacity even if it has a low current balance.

What is an overdraft?

An overdraft is a credit facility attached to a transaction or business account.

It allows the account balance to go below zero up to an approved limit.

For example, if you have a $10,000 overdraft, you may be able to draw the account to negative $10,000.

Overdrafts may be:

• personal
• business
• secured
• unsecured
• attached to a transaction account
• attached to a business account
• used occasionally
• used constantly
• fully drawn
• mostly unused

For mortgage assessment, the lender needs to understand the limit, balance, conduct and whether the facility will continue.

What is a line of credit?

A line of credit is a revolving credit facility that allows you to borrow, repay and redraw funds up to an approved limit.

It may be:

• unsecured
• secured against property
• linked to an investment strategy
• linked to a business
• used for personal expenses
• used for renovations
• used for cash flow
• used for investment purposes
• used as an equity access facility

The key issue is that the approved limit remains available while the facility is open.

Why overdrafts and lines of credit affect borrowing power

Lenders assess ongoing commitments when deciding how much you can borrow.

An overdraft or line of credit can affect borrowing power because:

• the limit remains available
• the balance can increase after settlement
• repayments may fluctuate
• interest costs can change
• the borrower may rely on revolving credit
• the facility can indicate cash-flow pressure
• business facilities may affect self-employed income
• account conduct may show financial stress

Even if the facility is not currently drawn, a lender may still include a repayment commitment.

Related research: Do Credit Card Limits Affect Your Home Loan Borrowing Power?

Is the balance or limit more important?

Often, the limit matters more than the current balance.

A lender may assess the facility using:

• the approved limit
• the current balance
• the higher of limit or balance
• a percentage of the limit
• an amortised repayment over an assumed term
• an interest-only repayment using a buffer
• the actual repayment, if policy allows
• the facility’s actual rate plus a buffer

This is why reducing or closing unused limits can improve borrowing power.

Can an unused overdraft affect a home loan?

Yes.

An unused overdraft can still affect your borrowing power if the facility remains open.

A lender may treat the approved limit as available debt, even if the balance is zero.

For example, a $15,000 unused overdraft may still be included because you could draw it after settlement.

If you do not need the facility, reducing or closing it before applying may improve borrowing capacity.

Can an unused line of credit affect a home loan?

Yes.

An unused line of credit can also reduce borrowing power.

A lender may include the approved limit because the funds remain available.

This may apply to:

• personal lines of credit
• secured lines of credit
• home equity lines
• investment lines of credit
• portfolio loans
• business lines of credit
• overdraft-style facilities

If the facility is open, it may need to be assessed.

How do lenders assess personal overdrafts?

Lenders can assess personal overdrafts in different ways.

Based on current policy research, some lender policies assess personal overdrafts or unsecured lines of credit by applying a benchmark repayment to the higher of the limit or balance.

For example, one lender policy refers to a benchmark repayment of 3.8% of the higher of limit or balance for personal overdrafts and unsecured lines of credit.

This can be a large servicing commitment if the limit is high.

How do lenders assess lines of credit?

Lenders may assess lines of credit by treating the approved limit as a debt.

Based on current policy research, one lender policy indicates that a line of credit may be entered as an “other debt”, with the limit treated as the balance, an assumed term such as 24.5 years, and the actual interest rate used for servicing.

Other lenders may use a monthly repayment based on a percentage of the limit or an amortised repayment over a notional term.

The treatment varies, so lender selection can matter.

How do lenders assess secured lines of credit?

A secured line of credit may be assessed differently from an unsecured facility.

A secured line of credit may be secured by:

• your home
• an investment property
• a portfolio facility
• an equity access loan
• another residential property
• a business property

The lender may assess it as a mortgage-style commitment, interest-only commitment, or revolving credit facility depending on policy.

Some lender policies assess existing secured overdrafts or secured lines of credit using an interest rate buffer or floor rate, and an interest-only repayment method.

How do lenders assess business overdrafts?

Business overdrafts can be more complex.

A lender may consider:

• who owns the business
• who owns the facility
• whether the borrower is personally liable
• whether the business can service it
• whether the facility is in a company, trust, partnership or sole trader name
• whether self-employed income is being used
• whether the overdraft is required for working capital
• whether the limit is seasonal
• whether the facility is constantly drawn

Based on current policy research, some lender policies require business overdrafts to be included in the servicing calculator with the self-employed income assessment.

How do lenders assess business lines of credit?

Business lines of credit may be assessed using a notional repayment.

Based on current policy research, some lender policies assess business overdrafts and business lines of credit by amortising the actual limit over a notional term, such as 15 years, using a business benchmark rate or the actual rate plus a buffer.

This means the full facility limit may matter, not just the amount drawn today.

What if the overdraft is in a company name?

A company overdraft may still affect your home loan if you are a director, shareholder, guarantor or self-employed borrower.

The lender may ask:

• is the facility in the company name?
• are you personally liable?
• have you guaranteed it?
• is the business profitable?
• is self-employed income being used?
• is the overdraft shown in financial statements?
• is the overdraft used regularly?
• is it secured by property?
• will the facility continue?

If your income relies on the company, the business overdraft may still be assessed.

What if the line of credit is in a trust?

A trust line of credit can also matter.

The lender may review:

• trust deed
• trustee
• guarantors
• business or investment purpose
• facility limit
• current balance
• repayment history
• whether the borrower controls the trust
• whether the trust income is being used
• whether the facility is continuing

Trust and company facilities often need more documentation than personal overdrafts.

What if the overdraft is for business cash flow?

Business overdrafts are often used for working capital.

That does not automatically stop approval.

However, the lender may consider whether:

• the business regularly trades in overdraft
• the facility is seasonal
• the limit is appropriate
• the overdraft is reducing or increasing
• there are dishonours
• tax debts exist
• supplier payments are late
• financial statements show reliance on debt
• the borrower draws personal income from the business

If the business is constantly at its limit, lender confidence may reduce.

What if the overdraft is only used seasonally?

Seasonal overdraft use may be explainable.

For example, some businesses use an overdraft to manage stock, invoices, tax timing or seasonal cash flow.

A lender may ask:

• what is the business cycle?
• when is the overdraft used?
• when is it repaid?
• what is the average utilisation?
• does the business trade profitably?
• are there regular deposits clearing the overdraft?
• is the limit appropriate?
• is the facility temporary or ongoing?

Clear business records can help explain seasonal overdraft use.

What if the overdraft is constantly maxed out?

A constantly maxed-out overdraft is more concerning.

It may indicate:

• cash-flow pressure
• reliance on debt
• poor business liquidity
• personal living expenses exceeding income
• business losses
• slow debtor collection
• tax or supplier pressure
• limited savings buffer

The lender may ask for an explanation and may assess the application more conservatively.

What if the overdraft has over-limit events?

Over-limit conduct can affect approval.

A lender may review whether the account has:

• exceeded the approved limit
• been overdrawn without approval
• incurred over-limit fees
• had dishonours
• had missed payments
• had returned direct debits
• breached facility terms

Over-limit conduct can be more serious than simply having an overdraft facility.

What if your bank account was overdrawn without an overdraft?

That is different from having an approved overdraft.

An approved overdraft is an agreed credit facility.

An unauthorised overdrawn account may suggest poor account conduct.

A lender may ask:

• how often did the account go overdrawn?
• how long did it stay overdrawn?
• was it corrected quickly?
• were fees charged?
• were direct debits dishonoured?
• was there financial stress?
• has the issue been resolved?

An approved facility is generally easier to explain than repeated unauthorised overdrawing.

Related research: Can You Get a Home Loan with Overdrawn Bank Statements?

What if the overdraft is secured by your home?

A secured overdraft or home equity line may be assessed as a mortgage-style debt.

The lender may ask:

• what property secures it?
• what is the approved limit?
• what is the current balance?
• is it interest-only?
• what is the interest rate?
• is it being refinanced?
• will it remain open?
• is it linked to an investment or business purpose?
• is there available redraw or unused limit?

Unused secured limits can still affect borrowing power and debt exposure.

What if the line of credit is attached to an investment property?

An investment line of credit may be assessed with your investment debts.

A lender may consider:

• facility limit
• balance
• interest rate
• deductibility of interest
• rental income
• investment property value
• whether the line is interest-only
• whether it is being retained
• whether it is used for shares, renovations or deposits

The facility may affect both servicing and debt-to-income ratio.

What if the line of credit is used for shares?

A line of credit used for shares may interact with investment income.

The lender may ask:

• what investments were purchased?
• is interest deductible?
• is income received from the investments?
• is investment income being used for servicing?
• what is the facility limit?
• is the balance volatile?
• are there margin calls or other investment risks?

A secured line of credit for shares is still a debt commitment.

What if the line of credit is used for renovations?

A line of credit used for renovations may be acceptable, but the facility still needs to be assessed.

The lender may ask:

• was the money used for home improvements?
• are renovations complete?
• is the facility being retained?
• will it be paid out?
• is there a valuation uplift?
• is the line of credit secured?
• are further drawings planned?

If the line will remain open, the unused limit may still matter.

What if the line of credit is used for a deposit?

Using a line of credit for a deposit can be complex.

The lender may ask:

• is the deposit borrowed?
• what property secures the line of credit?
• is the facility being increased?
• will the repayment be included?
• does the borrower have genuine savings?
• is the source of funds acceptable?
• does LMI apply?

Borrowed deposit funds can reduce borrowing power and may not satisfy genuine savings requirements.

Can an overdraft be paid out before applying?

Yes.

If you do not need the overdraft, closing it may improve borrowing power.

A lender may request evidence such as:

• statement showing nil balance
• closure confirmation
• limit cancellation letter
• bank confirmation
• online banking evidence
• updated business facility letter
• credit report update, if relevant

Paying the balance to zero may not be enough if the limit remains available.

Can a line of credit be paid out before applying?

Yes.

Paying out and closing a line of credit may improve borrowing power.

The lender may ask for:

• payout figure
• current statement
• closure letter
• evidence limit is cancelled
• discharge confirmation, if secured
• updated title or mortgage details, if relevant
• confirmation no redraw remains available

A paid-off line of credit with an open limit may still be assessed.

Is reducing the limit enough?

Sometimes.

Reducing the approved limit may improve borrowing power without closing the facility entirely.

This may help if:

• the facility is useful for emergencies
• the business needs a smaller working capital limit
• you want to keep one facility open
• the current limit is much higher than needed
• borrowing power is tight

The lender will usually need evidence of the reduced limit.

What evidence proves an overdraft or line of credit limit?

A lender may request:

• facility statement
• internet banking screenshot
• letter of offer
• credit contract
• bank confirmation letter
• account statement
• repayment schedule
• business facility letter
• company financial statements
• credit report data
• payout or closure letter

The evidence should show the account holder, limit, balance and current status.

What if the lender asks for statements?

Statements may be needed to verify account conduct.

A lender may review:

• current balance
• approved limit
• repayments
• interest charges
• missed payments
• dishonours
• over-limit events
• whether the balance is increasing
• whether the facility is regularly used
• whether credits clear the facility

Statements may be especially important if the facility is being refinanced or there are conduct concerns.

What if the lender uses credit reporting only?

Some lenders may rely on comprehensive credit reporting if the facility is reported clearly.

Credit reporting may show:

• account type
• credit provider
• approved limit
• repayment history
• account status
• arrears
• opening date
• closure date

However, if the facility is business-related or not reported clearly, statements may still be needed.

What if the overdraft does not appear on your credit report?

It may still need to be disclosed.

Some overdrafts, business facilities or older lines of credit may not appear clearly on credit reporting.

The lender may identify them through:

• bank statements
• business financials
• loan statements
• tax returns
• interest expenses
• balance sheet liabilities
• application disclosures
• account conduct

If you are liable for the facility, disclose it.

What if the credit report shows an old line of credit?

You may need to prove whether it is still open.

The lender may ask for:

• current statement
• closure letter
• bank confirmation
• online banking screenshot
• updated credit report
• discharge evidence, if secured

If the line is closed, provide evidence. If it is open, the limit may be assessed.

What if the balance is higher than the limit?

A balance above the limit can be a serious concern.

The lender may ask:

• why did it exceed the limit?
• was it approved temporarily?
• has it been corrected?
• are there fees or penalties?
• does it indicate hardship?
• did the account breach conditions?
• is the facility now operating normally?

The higher of limit or balance may be used in servicing by some lenders.

What if the line of credit is interest-only?

Many lines of credit operate on an interest-only basis.

A lender may not simply use the current interest-only payment.

They may apply:

• a higher assessment rate
• an interest rate buffer
• a floor rate
• an amortised repayment
• an assumed repayment term

This means the lender’s assessed repayment may be higher than what you currently pay.

Related research: Can You Get an Interest-Only Home Loan in Australia?

What if the actual repayment is low?

A low actual repayment does not always mean low assessment impact.

Because overdrafts and lines of credit can remain drawn indefinitely, lenders may calculate a higher notional repayment.

They may use:

• benchmark repayment
• assessed interest rate
• notional term
• approved limit
• higher of limit or balance

This can reduce borrowing power more than expected.

What if the facility is repaid in full every month?

Good conduct helps, but the limit may still be included.

If the facility remains open, the lender may still assess the approved limit.

However, paying it down regularly can help show:

• strong cash flow
• no reliance on debt
• good account management
• no arrears
• no over-limit conduct
• responsible use

The lender may still include a repayment commitment unless the facility is closed or reduced.

What if the overdraft is used only as a buffer?

An overdraft used as a backup buffer may still affect borrowing power.

If you rarely use it, you might consider reducing or closing it before applying.

A lender may not distinguish between a rarely used limit and a frequently used limit when calculating the assessed commitment.

The conduct may be viewed differently, but the limit can still matter.

What if you need the overdraft for your business?

Do not close a business overdraft without considering business cash flow.

Closing or reducing a business overdraft may improve home loan borrowing power, but it may hurt the business if it relies on working capital.

Before reducing it, consider:

• seasonal cash flow
• supplier payments
• payroll
• BAS and tax timing
• customer payment delays
• inventory needs
• lender covenants
• business risk

A broker and accountant can help compare the personal lending benefit against business cash-flow risk.

Can you consolidate an overdraft into the mortgage?

Possibly.

A lender may allow debt consolidation if the purpose is acceptable and LVR allows.

This may involve paying out:

• personal overdraft
• unsecured line of credit
• credit card
• personal loan
• car loan
• business debt, in limited cases

However, consolidating short-term or working capital debt into a long-term mortgage should be considered carefully.

Can you consolidate a business overdraft into a home loan?

Sometimes, but it is more sensitive.

A lender may be cautious about using residential mortgage funds to clear business debts.

They may ask:

• what is the business debt?
• why is it being cleared?
• is the business still trading?
• will the facility be closed?
• will business cash flow suffer?
• is there ATO debt?
• is the purpose acceptable?
• does the borrower understand the risk?

Some lenders restrict business-purpose cash out or business debt refinance under residential policy.

Is debt consolidation always a good idea?

No.

Debt consolidation can reduce monthly repayments, but it may increase total interest over time.

Benefits may include:

• lower monthly repayments
• fewer accounts
• cleaner cash flow
• reduced unsecured debt
• improved serviceability

Risks may include:

• turning short-term debt into long-term mortgage debt
• using home equity for unsecured or business debt
• reopening the same overdraft later
• not fixing the underlying cash-flow issue
• increasing total interest paid

Debt consolidation should be part of a clear plan.

What if the facility will be paid out at settlement?

This may help.

If the overdraft or line of credit will be paid out and closed at settlement, the lender may assess the application on that basis.

They may require:

• payout statement
• facility balance
• account details
• closure instructions
• settlement direction
• evidence the limit will be cancelled
• confirmation no redraw remains available

If the limit remains open after settlement, the lender may still include it.

What if the facility will be reduced at settlement?

A lender may consider this if there is clear evidence.

They may need:

• current limit
• proposed new limit
• lender confirmation
• amended facility letter
• borrower instruction
• evidence the reduced limit will apply

The new limit may be used only once it is verified.

What if you want to keep the facility after settlement?

You can keep it if the home loan still services with the facility included.

A lender may assess the ongoing limit and repayment commitment.

Keeping the facility may be acceptable if:

• income is strong
• LVR is reasonable
• conduct is clean
• other debts are manageable
• the facility limit is not excessive
• the lender’s calculator passes

You do not always need to close every facility.

What if the facility is shared with someone else?

Shared overdrafts and lines of credit need careful assessment.

A lender may ask:

• who is legally liable?
• is the facility joint?
• who uses it?
• who makes repayments?
• is another party responsible?
• is there evidence of apportionment?
• will the facility continue?

Some lenders allow shared commitment apportionment in certain cases, but not always.

What if your partner has the overdraft?

If your partner is applying with you, their overdraft or line of credit will usually be included.

If your partner is not applying, the lender may still consider household expenses and shared obligations.

The treatment may depend on:

• legal liability
• borrower structure
• relationship status
• who pays the facility
• whether finances are combined
• whether common debt rules apply
• whether the facility supports household or business expenses

What if your ex-partner is still on the line of credit?

This can affect your application.

If you are still legally liable, the lender may include the debt.

They may ask:

• who is named on the facility?
• who controls the account?
• who makes payments?
• is it part of a separation agreement?
• will it be closed or refinanced?
• is conduct clean?
• does the facility appear on your credit report?

If you remain liable, the facility can reduce borrowing power even if your ex-partner uses it.

What if the facility is guaranteed by you?

A guarantee can matter.

If you guarantee someone else’s overdraft or line of credit, a lender may assess the potential liability.

They may ask:

• what is the guarantee amount?
• who is the borrower?
• is the facility up to date?
• is the guarantee limited or unlimited?
• can the primary borrower service it?
• is the guarantee secured by your property?
• can the guarantee be released?

Guarantees can affect borrowing capacity and risk.

What if an overdraft is secured by a family guarantee?

This can be especially complex.

A lender may review not only your own debt but also any guarantees or available limits secured against property.

The risk may include:

• unused credit limits
• redraw availability
• prior guarantees
• business overdrafts
• investment loans
• cross-collateralised facilities

If a guarantee property supports multiple debts or limits, the lender may take a conservative view.

What if the overdraft is cross-collateralised?

Cross-collateralisation can complicate approval.

This means one or more properties secure multiple facilities.

A lender may need to understand:

• which properties secure the overdraft
• which loans are linked
• total limits
• total balances
• whether any security is being released
• whether refinance is possible
• whether the overdraft remains after settlement

Cross-collateralised overdrafts can delay refinance and equity release.

What if you have a portfolio line of credit?

Portfolio lines of credit can be complex because they may secure multiple properties or investments.

A lender may assess:

• total limit
• total balance
• property securities
• investment purpose
• interest-only structure
• repayment method
• rental income
• unused limits
• whether the facility is being refinanced
• whether any securities are being released

These facilities often need detailed statements and security schedules.

What if your line of credit is linked to an offset account?

A line of credit is different from an offset account.

An offset account contains your own money.

A line of credit gives access to borrowed money.

Even if you have cash sitting in an offset account, the lender may still assess the approved line of credit limit unless the facility is closed or reduced.

Savings do not automatically cancel an available credit limit.

What if you have savings greater than the line of credit?

Savings can help the overall application, but the line of credit may still be assessed.

The lender may consider:

• whether savings are needed for deposit
• whether the facility remains available
• whether the balance can increase after settlement
• whether the borrower will keep the line open
• whether the savings will reduce after settlement

If the line is not needed, reducing it can still help borrowing power.

What if the overdraft is new?

A recently opened overdraft can require closer review.

The lender may ask:

• why was it opened?
• what is the limit?
• has it been used?
• is the account conduct clean?
• does it indicate cash-flow pressure?
• was it opened before or after pre-approval?
• will it remain open?

New credit before settlement can affect final approval.

What if you open a new line of credit after pre-approval?

Be careful.

A pre-approval is based on your financial position at the time.

A new line of credit before formal approval or settlement can affect:

• borrowing power
• credit enquiries
• debt-to-income ratio
• LMI approval
• final assessment
• loan conditions

Avoid opening new facilities before settlement unless your broker confirms it will not affect approval.

What if you increase the overdraft limit before settlement?

This can create problems.

Increasing a limit may reduce borrowing capacity and may be considered a material change.

A lender may reassess if:

• updated credit reporting is obtained
• updated statements are requested
• LMI approval is needed
• credit conduct is reviewed
• the new limit affects servicing

Avoid increasing limits during a home loan application.

What if you reduce the limit after pre-approval?

Reducing the limit may help if borrowing power is tight.

The lender may need evidence of the reduced limit before using it.

Evidence may include:

• amended facility letter
• statement showing new limit
• bank confirmation
• online banking screenshot
• closure letter
• credit provider confirmation

If the old limit still appears on credit reporting, the mismatch should be explained.

What if the lender asks why you have the facility?

A lender may ask for the purpose of an overdraft or line of credit.

Common explanations include:

• emergency buffer
• business cash flow
• seasonal working capital
• investment borrowing
• renovations
• deposit funding
• debt consolidation
• tax timing
• cash-flow smoothing
• temporary support

The explanation should be honest and consistent with statements and financial records.

What if the overdraft is used for living expenses?

This can be a concern.

If a personal overdraft is regularly used to cover everyday expenses, the lender may consider whether income is enough to support the household.

They may review:

• frequency of use
• repayment pattern
• whether wages clear the overdraft
• whether the account falls back into overdraft quickly
• whether other debts are also increasing
• whether expenses are understated
• whether there are dishonours

Regular reliance on overdraft can reduce lender confidence.

What if wages clear the overdraft each pay cycle?

This may be better than a facility that remains constantly drawn.

However, the lender may still review whether:

• the overdraft is used every month
• spending exceeds income
• the balance returns to negative quickly
• there are dishonours
• the limit is appropriate
• the facility is needed after settlement

The account conduct story matters.

What if the overdraft is only for emergencies?

If the overdraft is rarely used, account conduct may be acceptable.

However, the approved limit may still reduce borrowing power.

If borrowing capacity is tight, consider whether you need the emergency facility or whether a savings buffer is more suitable.

What if your business line of credit funds tax payments?

This may need explanation.

A lender may ask:

• is there ATO debt?
• are tax lodgements up to date?
• is the facility used for normal BAS timing?
• is tax debt being carried forward?
• is there a payment arrangement?
• is the business profitable?
• is the line of credit increasing?

Using working capital for tax timing can be normal. Using debt to manage ongoing tax arrears can be a concern.

What if the facility is used for BAS or GST timing?

For self-employed borrowers, business overdrafts may smooth BAS, GST and invoice timing.

The lender may ask for:

• business financial statements
• BAS statements
• tax returns
• account statements
• ATO account balance
• explanation of working capital cycle
• evidence debts are current

Clear tax and business conduct can help.

What if the overdraft pays suppliers or wages?

This can be normal for business cash flow, but it still needs assessment.

The lender may consider:

• whether the facility is seasonal
• whether it clears regularly
• whether payroll is dependent on debt
• whether the business is profitable
• whether supplier payments are current
• whether the facility limit is increasing
• whether business income supports the borrower’s personal income

A healthy business may use an overdraft responsibly. A stressed business may rely on it to survive.

What if your business overdraft is secured by your home?

This can affect both borrowing power and security risk.

A lender may ask:

• is your home already securing business debt?
• will the new home loan be second priority?
• is there enough equity?
• is the overdraft being refinanced?
• will the business facility remain?
• what securities are tied to the debt?
• is the facility cross-collateralised?

Residential lenders may be cautious where business debt is secured by residential property.

What if you are refinancing a home loan and keeping the line of credit?

The new lender will assess both the refinance and the remaining facility.

They may review:

• existing mortgage
• line of credit limit
• line of credit balance
• repayment history
• interest rate
• security property
• whether the line is being transferred
• whether it will remain with the old lender
• whether any mortgage needs to be discharged

Keeping an existing line of credit can complicate refinance.

What if you are refinancing the line of credit too?

The lender may need payout and closure details.

They may ask for:

• current statement
• payout figure
• interest calculation
• discharge authority
• account closure confirmation
• security release details
• settlement instructions

If the line of credit is being cleared, the lender may assess the post-settlement position instead of the ongoing repayment.

Can a line of credit affect reduced-buffer refinance?

Yes.

Some refinance pathways have strict rules about existing commitments and credit conduct.

A line of credit or portfolio loan may affect eligibility if:

• it is being refinanced
• it is secured by property
• repayment history is not clear
• the facility is recently opened
• the refinance includes debt consolidation
• the borrower structure changes
• the facility is not reported clearly
• statement requirements are not met

A standard refinance may still be possible even if a streamlined path is not.

What if the facility has repayment history issues?

Repayment history can affect approval.

A lender may review:

• late payments
• missed payments
• dishonours
• arrears
• over-limit events
• hardship arrangements
• defaults
• account now current
• explanation

Recent or repeated conduct issues can reduce lender options.

What if the facility is in hardship?

A hardship arrangement can make approval harder.

The lender may ask:

• when hardship started
• when it ended
• whether the facility is now up to date
• whether credit reporting shows hardship
• whether normal payments have resumed
• whether the cause of hardship is resolved
• whether the borrower can afford a new mortgage

Recent hardship may push the application toward specialist lenders.

What if the overdraft has a default?

A default can affect approval.

The lender may assess:

• default amount
• date listed
• whether paid
• whether unpaid
• reason for default
• other credit conduct
• LVR
• deposit strength
• time since default
• whether specialist lending is needed

A paid older default may be easier than a recent unpaid default.

What if a line of credit was part of a debt agreement?

This can be more serious.

A debt agreement may limit mainstream lender options for a period of time.

The lender may review:

• start date
• completion date
• debts included
• current credit conduct
• savings history
• deposit strength
• LVR
• employment stability
• whether specialist lending is required

A current or recent debt agreement can make approval harder.

Related research: Can You Get a Home Loan After a Debt Agreement?

Does debt-to-income ratio matter?

Yes.

An overdraft or line of credit can increase total debt exposure.

Depending on lender policy, DTI may include:

• current balances
• approved limits
• credit card limits
• overdraft limits
• line of credit limits
• personal loans
• car loans
• mortgage debt

High approved limits can push DTI higher even when balances are low.

Can reducing limits improve DTI?

Yes.

Reducing unused overdraft or line of credit limits may reduce assessed debt.

This can help where:

• total limits are high
• income is moderate
• LVR is high
• LMI applies
• the application is near lender DTI thresholds
• the facility is not needed
• borrowing power is tight

Limit reduction can improve both servicing and debt exposure.

Can overdrafts affect lenders mortgage insurance?

Yes, indirectly.

LMI providers assess overall risk.

Overdrafts and lines of credit may affect:

• serviceability
• DTI
• credit conduct
• account management
• savings behaviour
• reliance on revolving credit
• deposit strength
• overall affordability

A clean, low-limit facility is less concerning than a high-limit or poorly conducted one.

Can overdrafts affect first-home buyers?

Yes.

First-home buyers often borrow at higher LVRs and may have less surplus income.

An overdraft or line of credit may affect:

• maximum borrowing capacity
• LMI approval
• low-deposit scheme approval
• genuine savings
• funds to complete
• credit conduct
• monthly cash flow

Reducing unused limits can be useful before applying.

Can overdrafts affect the First Home Guarantee?

Yes, through normal lender assessment.

The First Home Guarantee does not remove the need to pass servicing.

The lender still assesses:

• overdraft limits
• line of credit limits
• repayment history
• income
• expenses
• other debts
• proposed repayments
• property eligibility

Scheme eligibility and loan approval are separate.

Can overdrafts affect investment borrowing?

Yes.

Investors may have multiple facilities, equity lines and revolving credit.

The lender may assess:

• investment lines of credit
• personal overdrafts
• business overdrafts
• rental income
• existing mortgages
• credit card limits
• proposed investment debt
• tax position

High available limits can restrict portfolio borrowing capacity.

Can overdrafts affect construction loans?

Yes.

Construction lending requires the borrower to service the loan during and after construction.

An overdraft or line of credit may affect:

• borrowing capacity
• funds to complete
• contingency
• progress payment affordability
• builder contract assessment
• deposit contribution
• ability to cover overruns

If business overdrafts are also involved, self-employed income assessment may be more complex.

Can overdrafts affect guarantor loans?

Yes.

A guarantor may help with security, but the borrower still needs to service the loan.

The lender will still assess:

• borrower income
• overdraft limits
• line of credit commitments
• living expenses
• other debts
• proposed home loan repayment

If the guarantor also has overdrafts or business debts, their position may also be reviewed.

What if the guarantor has business overdrafts?

A guarantor’s business overdrafts can matter because the lender must assess their overall financial position and security risk.

The lender may consider:

• business overdraft limits
• investment loans
• unused credit limits
• guarantees already provided
• cross-collateralised debts
• available equity
• repayment obligations

This can affect whether the guarantee is acceptable.

What if the facility is attached to a mortgage offset product?

Some mortgage products include redraw, offset and line-of-credit features.

The lender may need to separate:

• offset account funds
• redraw availability
• line of credit limit
• current balance
• scheduled repayments
• interest-only features
• unused limits

An offset account is savings. A line of credit is debt capacity.

What if the line of credit is part of a portfolio loan?

Portfolio loans can be more complex than ordinary home loans.

The lender may assess:

• each sub-account
• total approved limit
• current balances
• secured properties
• interest-only portions
• investment purpose
• credit conduct
• available redraw
• whether the portfolio is being refinanced

Portfolio facilities often need detailed statements.

What documents may lenders request?

Depending on the facility, lenders may request:

• overdraft statement
• line of credit statement
• letter of offer
• facility agreement
• interest rate confirmation
• repayment schedule
• current limit confirmation
• current balance
• payout figure
• closure letter
• business financial statements
• company or trust documents
• credit report
• bank transaction statements
• security schedule
• discharge authority
• explanation of facility purpose

The more complex the facility, the more evidence may be required.

What should an overdraft statement show?

A useful overdraft statement should show:

• account holder name
• account number
• lender name
• approved limit
• current balance
• interest charges
• repayment or fee history
• transaction history
• over-limit events, if any
• dishonours, if any
• account status
• statement period

The lender needs enough information to verify both liability and conduct.

What should a line of credit statement show?

A useful line of credit statement should show:

• facility holder
• approved limit
• current balance
• interest rate
• repayment method
• interest charges
• available redraw
• repayment history
• arrears position
• security details, if available
• whether the facility is open
• statement period

If the line is secured, mortgage or title documents may also be needed.

What if the lender asks for a business facility letter?

A business facility letter may show:

• borrower entity
• guarantors
• approved limit
• facility type
• interest rate
• expiry or review date
• security
• repayment requirements
• covenants
• purpose
• related accounts

This can help the lender understand whether the facility affects you personally.

What if the facility is reviewed annually?

Many business overdrafts are subject to review.

The lender may ask:

• when is the next review?
• has the facility been renewed?
• are there covenants?
• has the bank reduced the limit?
• is the business trading satisfactorily?
• are there arrears or breaches?

An overdraft due for review may need up-to-date evidence.

10 common mistakes with overdrafts and lines of credit

1. Do not assume a zero balance means the facility is ignored.
2. Do not forget unused overdraft limits.
3. Do not hide a business overdraft because it is in a company name.
4. Do not assume the lender will use your low actual interest-only payment.
5. Do not open or increase a facility before settlement.
6. Do not use an overdraft as a deposit without checking policy.
7. Do not pay a facility to zero but leave the limit open if servicing is tight.
8. Do not ignore account conduct or over-limit events.
9. Do not assume secured lines of credit are assessed like normal home loans.
10. Do not consolidate business debt without understanding the long-term cost.

How to improve your chances of approval

Before applying, it helps to review all overdrafts and lines of credit.

Useful steps include:

• list every overdraft and line of credit
• confirm each limit and balance
• identify personal and business facilities
• check whether you are personally liable
• obtain recent statements
• check repayment and account conduct
• reduce unused limits if suitable
• close facilities you no longer need
• prepare payout letters if consolidating
• avoid new credit before settlement
• explain business facilities clearly
• disclose guarantees and cross-collateralised debts
• compare lender policy before lodging

A clean, well-explained facility is easier to assess than an undisclosed or poorly conducted one.

Should you wait before applying?

Sometimes waiting can help.

Waiting may improve your options if:

• you recently reduced a limit
• you recently closed a facility
• there were recent over-limit events
• the facility is currently maxed out
• business financials need updating
• a line of credit is being paid out
• credit report data is outdated
• borrowing power is tight
• LMI applies

You may not need to wait if:

• the facility is modest
• conduct is clean
• the loan services with the limit included
• your income is strong
• LVR is acceptable
• lender policy suits the facility type

A broker can compare applying now versus reducing or closing facilities first.

Example scenarios

Scenario 1: Unused personal overdraft

You have a $10,000 overdraft with a zero balance.

The lender still includes a repayment commitment based on the limit.

Reducing or closing the limit may improve borrowing power.

Scenario 2: Personal line of credit with low balance

You have a $30,000 line of credit with only $2,000 drawn.

The lender may still assess the approved limit, not just the current balance.

Scenario 3: Business overdraft for working capital

You are self-employed and your business has a $50,000 overdraft.

The lender may include the facility in the self-employed assessment and may assess the limit using a notional repayment.

Scenario 4: Secured line of credit

You have a home equity line of credit secured by an investment property.

The lender may assess it as a secured revolving facility and apply an assessment rate or assumed repayment.

Scenario 5: Overdraft over the limit

Your overdraft went over limit twice in the last month.

The lender may ask for an explanation and review account conduct more closely.

Scenario 6: Line of credit being paid out at settlement

You are refinancing and the line of credit will be cleared and closed at settlement.

The lender may require a payout statement and closure instructions before excluding the ongoing commitment.

So, can you get a home loan with an overdraft or line of credit?

Yes, you may be able to get a home loan with an overdraft or line of credit.

The strongest applications usually have:

• all facilities disclosed
• clear limit and balance evidence
• clean repayment conduct
• no recent over-limit events
• manageable facility limits
• no unexplained reliance on revolving credit
• strong income
• realistic living expenses
• acceptable deposit
• lender policy that suits the facility type

An overdraft or line of credit does not automatically stop approval, but unused limits, business facilities, poor conduct and high revolving debt can reduce borrowing power.

Need help getting a home loan with an overdraft or line of credit?

A mortgage broker can help compare lenders that may consider borrowers with personal overdrafts, business overdrafts, unsecured lines of credit, secured lines of credit, portfolio loans and revolving credit facilities.

We can review your limits, balances, account conduct, business facilities, guarantees, deposit, LVR, income and borrowing power before you apply.

If you have an overdraft or line of credit and want to buy or refinance, speak with a mortgage broker who understands how different lenders assess revolving credit facilities.