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Budgeting wisely at Christmas to get a loan

With the cost of living and mortgage rates continuing to rise, many homeowners are looking at the different ways they can save some money. Christmas is coming up so it’s important to start thinking about your budget over the holiday period.

While we all love giving presents, if you’re looking at potentially applying for a home loan in the new year, it’s important that you don’t do any damage to your chances of getting finance by overspending in the next few weeks. What we do know, is that lenders take a snapshot of your financial situation when they assess your application for finance and if you’ve been busy racking up credit card debt, it might come back to hurt you in the future. Here are some quick tips for budgeting at Christmas.

Allocate money upfront
There’s a good chance that you will be spending this Christmas, so do it wisely. Make a budget and try and stick to it. Lenders will look at your bank and credit card statements from at least a three month period, so if you’re looking to have a clean record for your loan application, it might be worth keeping the charges down.

One idea could be withdrawing cash and paying for things with physical money, that way you can allocate funds upfront. Another budgeting idea is to simply spend a fixed amount per person. That way you can allocate a pool of money and everyone gets a fair deal.

One of the big traps that a lot of people fall into is minimising the spending at Christmas, only to get sucked into all the Boxing Day and holiday sales. When you’re allocating your Christmas budget, it might be worth applying that to the entire holiday period.

Don’t overextend yourself
While any credit card debt isn’t great, the worst thing you can do is take on more credit cards. When it comes to borrowing money, your current debt is just as important as how high your credit limits are. If things are a bit tight on your loan application, it might even be worth getting rid of your credit cards to boost your borrowing capacity. This is tough to do if you have outstanding balances and it’s even more difficult if you can’t pay them off.

Invariably, if people have the money (or credit) at their disposal, they tend to spend it. Keep both the credit card spending down and certainly don’t take out any new cards in the coming months. Even if there are some great sales on.

Avoid Buy Now, Pay Later
These days, everyone is moving toward the buy now, pay later (BNPL) phenomenon. While it might be convenient, you don’t want these types of payments to impact your chances of securing a loan. While BNPL isn’t technically an application for finance, it could impact your credit score. More importantly, a lender will make an assessment on what type of borrower you are and if you have hundreds of these types of payments coming out of your account, it won’t look that good on the application. These days, every lender will assess your credit score and go over your bank details with a fine-tooth comb, so it is important to have things in order. Christmas is an incredible time of year and it’s great to give to family and loved ones. Just don’t overdo it or it could cost you a lot more in the long run, when the time comes to get a loan approved.

How to save for a home deposit at Christmas time

Traditionally, the Christmas and New Year period is the time of year where many of us tend to overspend. While this might be well-meaning, as most people are simply buying gifts for family and friends at Christmas or going on holiday, you need to be sure that it doesn’t blow your budget.

If your goal is to buy a property in the new year, then it’s important to not let a Christmas splurge get in the way of your real estate dreams.

Here are a few ways to better manage your money ahead of the holiday season.

Put the credit card away
The problem with credit cards is they are easy to use and not always easy to keep track of. During the lead-up to Christmas, it’s very easy to get carried away spending. This can not only hurt your savings, but it also makes it appear that your typical spending habits are a lot higher than they might be. A lender will take close look at your expenses over the previous three months when assessing a home loan application, and if they are excessive, it could dent your serviceability and risk getting your loan application rejected. If you don’t particularly use or need your credit card, it can often be a good idea to get rid of it altogether, as lenders assess your credit card as if it is fully maxed out.

Allocate funds in advance
We all know that budgeting is important but for most people it is not only hard to do, but hard to implement. One of the best ways to effectively budget is to allocate all your spending money in advance and put it on a debit card. This way, there is no chance you can go over budget. It’s even possible to have multiple debit cards for different areas of your life, such as essentials, spending money and things like bills and expenses. Then, you simply transfer funds to them each week. While this might seem a little over the top, if your goal is to get on the property ladder, then it might be well worth going to these lengths for even a short period of time.

Avoid borrowing
While it might be very tempting to jump on a plane after what has been a few rough years for those that love to travel, don’t take on any debts in the process. Many people like to put their holidays on credit or even take out a personal loan. The problem with adding debt is that this money needs to be paid back. When you have debts, it weighs on your serviceability. Given that credit cards and other unsecured debts attract incredibly high interest rates and need to be paid back in a matter of years at the latest, this can really hurt your bottom line when applying for a loan.

For first home buyers, even a $100 per week payment on a credit card or loan could be enough for you to miss out on getting a loan for your first property. If your goal is to buy a property, wait until you’ve settled on the property and made a new budget before going out and spending money you don’t have on a trip.

Four ways to style your home

When the time comes to sell, if you’ve got the budget to style your property, you might find that it can really help entice buyers. Typically, buyers like to see a home that is fully furnished, as it helps them imagine themselves living there. Here are 4 tips to effectively style your home:

Declutter
No one likes a mess and having clutter everywhere is both unappealing and makes your home look a lot smaller. When trying to sell, less is more.

Be prepared to remove all but the most essential items when you start showing people through your home. Clean tables and benchtops look more appealing and can also make the property look newer.

Taking out large pieces of furniture and adding in some mirrors also add to the effect of making your home seem larger than it is.

Deep clean
While it goes without saying that you should clean your house prior to selling it, if you go the extra mile it can make a big difference. Consider hiring professionals to give your property a deep clean, including things like between tiles so that your home gets a fresh new look.

Even outside, you can do things like hire a pressure cleaner to go over your driveway while washing your roof can also make it look like new again.

Fresh paint
There might be no better thing you can do to sell your home than give it a fresh coat of paint. Not only will it look cleaner and brighter, but it can help make the home feel bigger as well.

Finishing touches
There are a number of small touches that you can make to really give your home a great finish. Things like cushions on the chairs, or rugs and drapes in neutral colours add a lot to any room. A little bit of artwork on the walls makes the home feel warmer.

Additionally, some well-positioned plants are always a nice touch and help it feel more relaxing and homely.

Three property investment mistakes

While property has been an incredible investment for millions of Australians over a long period of time, you still want to make sure you’re buying the very best property you can. Putting a little bit more time into the search for a quality asset could make a huge difference. Here are three mistakes to avoid:

Not researching
A lot of new investors want to get into the property market but don’t spend enough time doing the due diligence that they should. Purchasing a property is a big decision and it’s important to determine the best location to buy that will give you the best return over time.

When looking at locations, observe the history of price growth in the suburb as well as the demographics that are living there. Also look at the infrastructure and amenities currently in place, and if anything else is planned to be coming soon.

Finally, examine how much stock is currently on the market compared to how much is selling. The tighter the market, the better your prospects for future capital growth.

Not thinking about tenants and buyers
When searching for a property, it can be easy to start looking for a home you want to live in. The only problem is, what you might want may not fit what the majority of people in the area want.

A great example might be buying a unit in an area that is dominated by families who want large homes. While the suburb might tick all the boxes, if you’re not buying the right type of home, bother renters and future buyers won’t be as interested in your property.

Not looking at the costs
When you purchase a property, there are several costs to factor in such as stamp duty and closing costs. However, the costs don’t stop there.

When you own a property, you will also have to factor in the ongoing costs such as strata fees, council rates, water rates and things like maintenance.

When doing a budget, it’s easy to forget about the costs that come with holding a property. While your rental yield might look good at first glance, the more your budget factors in the long-term costs, the better it’s going to be.x

Three ways to save money on your home loan

With the cost of living and mortgage rates continuing to rise, many homeowners are looking at the different ways they can save some money. Fortunately, if you already have a home loan, there are some options that might be able to help.

Consolidate debts
If you have a number of high-interest debts, it might be worth trying to consolidate them. When you consolidate debts, you are effectively rolling your higher-interest debts like credit cards and personal loans into a different loan with a lower interest rate.

A good way to do this is to refinance your home loan and take out one loan that could cover all of your debts in one go. This way, you’ll be saving money on interest, which you could then use to pay down your home loan faster.

Lower interest rates
With banks raising their interest rates and lower fixed-rate loans starting to roll off, it could be a good time to try and find a better deal on your home loan. Many lenders will offer competitive interest rates to new customers as well as other incentives that could save you money. By comparing your home loan options, you might be able to save money on interest payments.

Better loan features
These days there are several features that come with home loan products that can really help save money. One of the best is an offset account. An offset account is a lot like a transaction account, however, all the funds that you keep in the account help save on interest. It works because the interest payable is calculated off your home loan balance, less the funds contained in the offset account. An offset account allows you to keep any additional money in the account so you can access it if you need it – all the while saving you money on interest payments. It’s similar to having a redraw feature on your home loan.

It’s even possible to save more money with the help of an offset account by paying monthly expenses with a credit card and putting the saved money into your offset account. Then at the end of the month, you simply pay off the credit balance while still saving the interest on your home loan.

How to prepare for auction day as a buyer

If you’re in the market for a property – particularly in the larger states – there’s a good chance you’ll be needing to purchase the home through the auction process. While buying at auction can be daunting for a new buyer, there are a number of steps you can take to make the process easier.

Understand your finances
Getting your finances organised well in advance is one of the most important stages of the auction process, because it can give you a much clearer picture of what you’re able to afford. When buying at auction, the sale is unconditional, meaning you have to make sure your odds of getting finance are high. This all starts with talking to your mortgage broker about getting pre-approval. You will typically get an idea of how much a bank might lend you based on certain conditions and that will allow you to hone in on certain suburbs and price points with your upper limit well-established.

Know the market
One of the big issues auction buyers have faced over recent years has been getting blown out of the water on auction day. Normally, agents will issue a price guide – but this isn’t always the best indication of what a property might sell for. A better approach is to start doing your own comparative sales analysis on your suburb of interest. Compare recent sales for the same location, property type, size and age of the dwelling to get a clearer picture of what those types of properties are selling for. More often than not, properties will sell in a close range within a certain suburb.

Do your inspections
The fact that an auction is an unconditional sale means that you need to have everything organised well in advance of auction day. Meaning that any inspections you need to have done (or if there’s any information you want from the owners) should be sorted out early. The more organised you are, the better.

Auction day
On the day itself, it pays to be prepared. It can be a good idea to go to a few auctions in advance as an observer, just so you know the process and get familiar with some of the jargon. It’s good to be confident and be prepared to bid strongly. That can help to give the impression you’re there and ready to buy.

Pre-auction offers
When markets are a little cooler, many owners and agents are prepared to accept an offer prior to auction day. If you’re prepared to put up a fair offer, it is worth exploring this option. If there aren’t multiple registered bidders, an agent might just choose to accept an early offer instead of going through the process.

Advantages and disadvantages of pay off car loans early

A car loan is a great way to purchase a vehicle when you don’t have all the money to pay for the car upfront.

However, if you are getting ahead on your savings and potentially want to pay off your car ahead of time, there are a few things to consider.

Here are some of the benefits and disadvantages of paying off your car loan sooner.

Advantages

Save money on interest
The sooner you’re able to pay off your car loan, the less interest you will be paying on your loan. The extra interest can be put towards savings or other investments.

Pay off other debts
If you have a number of debts to your name, it can be a good idea to slowly start paying them down. If you can pay down a larger debt like a car loan, then the money you’re saving on interest could be put towards your other debts. Another option is to consolidate your debts into one loan with a lower interest rate.

You’ll own your car outright
When you take out a car loan, the loan itself is normally secured by the car. That means the lender still has a claim on the vehicle in the event that you don’t make the repayments. If you pay out the loan, you will own the car outright.

Disadvantages

Early repayment costs
The biggest downside to early repayments is that you could be required to pay some additional costs such as break and exit fees. These are often to do with the type of loan, especially if you have a fixed interest rate. All lenders and loans will have different policies so it’s worth examining your current loan documents to determine if, how much and what the possible costs could be.

Reduced savings
Just because you can pay down your loan doesn’t mean that it’s in your best interest to do so. Depending on what you need those additional funds for, they could be used elsewhere. For example, if you’re saving for a home and need a deposit, the money might be better off put towards that instead of paying off your car. Everyone’s personal circumstances will be a little bit different.