They call it the silly season for a reason.
Whether it is the twinkly lights, the masses of tinsel, or the Christmas carols blaring out, people are ready to go silly at the end of the year.
Being silly can be great. It allows you to let loose, have some much needed rest and fun times.
But, being silly is not so great when it comes to your finances. Just because it is Christmas and holiday time does not mean that you need to spend every cent that you have to your name… and sometimes more.
Christmas is definitely a time for giving, but within reason. Let’s look into how you can keep your spending in check, not go beyond your means, and keep your chances of borrowing for a mortgage looking good for the new year!
Keep Your Christmas Spending In Check
Short term debt can kill your chances of being approved for a mortgage. One of the biggest threats at this time of year is running up large amounts on your credit card.
The cliche that it is ‘the thought that counts’ is so relevant at this time of the year. You don’t have to break the bank when buying gifts for your friends and family.
Remember that holiday spending does not have to be expensive. People do not need top of the range gadgets, gourmet foods, top shelf drinks, or business class flights to have a good time. Instead, it is about being thoughtful and creative. Choose the foods everyone loves, bring out the traditional decorations and carpool for family Christmas events.
Some of the best gifts you can give don’t cost a lot of money. Think about the person that you are buying for, what do they really like? What can you buy them that is meaningful, but within budget? Also, think about who you are buying for. Of course you need to get gifts for the meaningful people in your life, but not for everyone you know.
Do Not Go Beyond Your Means
You should always try to stay within your means during the holiday season. There is a lot of opportunity to spend like crazy, but it doesn’t mean that you should take those opportunities.
The best thing to do is to set yourself a budget for your holiday spending. That means a budget that includes all of your potential outgoings - gifts, food, travel (if applicable), decorations, and general spending. Don’t simply pull numbers out of the air, really have a look at what you can afford to spend. Then, when you have the budget… stick to it!
Be realistic about your spending decisions and don’t feel pressured to spend just because everyone else is.
Keep Your Borrowing Power Up
As I mentioned above, one of the first things that a lender will look at when assessing your financial position is your short term debt.
Basically, all they are trying to work out is whether you are a good investment or not. Whether you will be able to make the loan repayments if they go ahead and lend you the money. Large sums on your credit card, personal loans, finance agreements, or lots of hire purchase arrangements will give the impression you are not good at managing your money.
Avoid putting yourself into debt this Christmas. If you can’t afford it right now then don’t buy it.
A lender will also check your spending habits. So, think very carefully about what you are buying even if you have the money available in your accounts. Lots of unnecessary spending may indicate to a lender that you will buy luxuries instead of paying back your loan.
While short term debt and big spending may not entirely prevent you from obtaining a mortgage, it can impact the amount you are able to borrow. A lender will want to ensure you can service the loan they give you. If you have a lot of other outgoings to cover then it can lower the amount they are willing to lend.
To wrap it up, my advice is to keep your holiday spending to a minimum this year. That way, you will give yourself the best chance of qualifying for a mortgage when you are ready to buy a home, invest in a second property, or even to borrow for renovations.
If you have any queries about your eligibility to borrow for a mortgage, then get in touch with me here at Mortgage Suite today.