If you’re planning to buy a new home next year, you need to keep a really tight rein on your spending this holiday season.
That’s the word from Carl Coetzee, CEO of mortgage originator BetterBond, who notes that consumers in an expansive mood statistically spend 15% to 30% more than they had originally planned on gifts, holiday accommodation and food at this time of year.
“However, this type of festive season extravagance could really hamper your chances of getting a home loan when January rolls around, especially if you max out your credit card to cover it.”
He says consumers who are planning a property purchase early in 2020 should also avoid lowering their credit score by opening any new credit accounts now for purchases such as large appliances, expensive electronic goods, furniture or cars.
“And they should absolutely not be tempted to take a holiday dip into any savings they have made for a home deposit or transaction costs. Cash is always in short supply when you buy a new home.”
To help potential homebuyers stay on financial course this holiday season, BetterBond has the following suggestions:
Develop a holiday budget: Make a list of who you are buying gifts for this year, assign an amount to each of them and stick to these limits when you go shopping. Even better, shop online for the specific items you want so you don’t get distracted and tempted to overspend by all the beautiful seasonal displays, and save time and transport costs by having them delivered.
Another way to contain festive expenditure is to limit gift-giving to children, especially if you have a large family gathering planned. Alternatively, you can set up a “Secret Santa” system where each person buys a gift for just one other person and set a maximum value per gift.
Instead of going away on holiday this year, why not put in some overtime or try to get a part-time job to earn extra money? Alternatively, bake or make some festive goods and sell them online or at your local craft market. Or use the time to clear unwanted goods out of your home, garage or storeroom and sell them too.
Try to avoid shopping at the last minute, especially for gifts and party food. The stress will lead you to buy whatever’s easiest, not most economical. And if there’s a big family lunch or dinner at your house this year, make a list of what you need and ask everyone coming to contribute a specific dish or item, so that you can all keep costs down.
Pay off any holiday debt as soon after New Year as possible. Knowing that you need to clear the outstanding balance on your credit card as soon as you get your statement in January should also motivate you to use it as little as possible during the run-up to Christmas.
“And next year,” says Coetzee, “once you are settled in your new home, you should consider setting aside a certain amount of “holiday savings” every month so that you don’t strain your budget in December.
“In fact, you may then even be able to put your whole 2020 bonus or 13th cheque straight into your home loan account and start generating significant savings in the interest on your home loan while reducing the time it will take to pay it off.
“If you are able to pay R10 000 off a R1m home loan, for example, you will immediately reduce the 20-year repayment period by around seven months and, at an interest rate of 10%, save more than R61 000 worth of interest.”