Family, food, and festivities is what Christmas is all about. Unfortunately, Christmas can also be a time of stress, juggling extra expenses and a further strain on the budget. And often, once the holiday is over, the reality of overspending sets in. If you’re applying for a mortgage – whether to buy a first home or to refinance – it’s important you keep a tight rein on spending. Avoid blowing out the budget and jeopardising your borrowing power with these 3 tips for managing Christmas spending.
1. Keep your Christmas spending in check
At this time of year, one of the biggest concerns for would-be homeowners or those considering refinancing is overspending on credit. Depending on your income level and how much lending you’re applying for, too much short term debt – such as credit cards, personal loans and car loans - can hinder your chances of being approved for a mortgage or limit how much lenders will lend to you.
The thing is, Christmas spending needn’t be expensive, and the old saying, “it’s the thought that counts” couldn’t be more apt than at this time of year! Here are some ways to avoid overspending during the holidays:
- Set a realistic budget and stick to it
- Shop with a list and track your spending as you go
- Shop early and shop online
- Give fewer gifts or smaller gifts
- Give your time instead of money
- Regift or make gifts
2. Avoid going beyond your means
Christmas is traditionally a time for giving and overindulging, so staying within your means and only spending what you can afford is certainly a challenge. Especially when we’re being constantly inundated with emails and mail-ins offering discounts and never-before-seen price deals, and buying on credit is so easy.
The best way to avoid a budget blow-out and a maxed-out credit card is to set a Christmas budget that includes things like gifts, food and travel, and then shop according to your budget. Be realistic about what you need to spend and don’t feel pressured into buying things just because everyone else is. By sticking to a budget, you’ll avoid that nasty feeling many people experience in January when the credit card statements start arriving!
3. Boost your borrowing power
When lenders assess financial position, one of the first things they’ll consider is the amount of short term debt you’re carrying in relation to your income. Most will also scrutinise what you’re spending your money on so it’s important you carefully consider any large purchases if you are applying for a mortgage or plan to refinance.
Lenders want assurance that you can afford your mortgage repayments before they agree to lend to you. And large amounts on your credit card and other short term debt could be a red flag and a signal to lenders that you’re unable to live within your means.
While short term debt and overspending may not prevent you from getting a mortgage, it could affect how much you may be able to borrow. One of the best ways to boost your borrowing power is to keep your spending to a minimum and pay cash instead of credit. That will improve your chances of qualifying for a mortgage.
Finally, if you’d like personal financial advice with a view to buying a first home or refinancing an existing mortgage, or if you have queries about your eligibility when it comes to borrowing, contact a Mortgage Express branded mortgage adviser today.
