The spring property season has arrived, although it may look a little different this year as lockdowns impact activity in several states and territories.
Whether you’re a prospective buyer looking to get into the market, or already own a home, it’s a good time to give your finances a spring clean to give yourself the best chance of achieving your financial goals.
Here are some tips to whip your finances into shape.
Reassess your budget
It’s likely your spending habits have changed during COVID-19 as lockdowns and border restrictions limit how we can spend our money.
The Commonwealth Bank estimates households have accrued $155 billion in excess savings on top of what they’d normally save since the pandemic began. Why not use this time to reflect on where you’ve been able to cut expenses and how you can make it a permanent change.
A well prepared budget gives you much more control over your money. Once you have a clear idea of your expenses compared to your income, you’ll be able to see how much you are saving and spending and whether or not you are on track to be able to borrow the amount you need.
Reduce your living expenses
Property prices have surged over the past 12 months, which means you may need to borrow more than you originally thought.
One way to increase your borrowing capacity is to reduce your living expenses. This shows your lender that you have more money available for repayments, increasing your serviceability. Start by cutting back on discretionary purchases and look around for a better deal on your insurance, telecommunications and utilities. You typically need to show lenders three to six months of expenditure and regular savings.
Ditch the credit
When it comes to credit cards, a lender is less interested in how much you owe, and more interested in how much you could potentially owe if you used all the money available to you.
That’s because they assess credit card debt by looking at the credit limit, rather than your current balance, so having multiple credit cards can really bite into your borrowing capacity.
If you’re looking to get a new loan, you could consider closing or reducing your credit card accounts. Buy-now-pay-later accounts can also affect a loan application, particularly if you use them regularly or have multiple accounts.
Get ready early
Lending and refinancing activity has surged to record levels in 2021, according to the Australian Bureau of Statistics. This huge increase in borrowing means loan approval times have blown out with many lenders.
At the same time, the property market is highly competitive right now, forcing buyers to move quickly to avoid missing out.
Have your Smartline Mortgage Adviser arrange a pre-approval so you can put down a deposit with confidence and start getting your documentation together now so you can apply for unconditional approval well in advance of settlement.
Shop around for the right loan
Lenders are competing hard for new customers with competitive borrowing rates and cash back deals on offer.
Your Smartline Mortgage Adviser can assess your personal situation and help you find a lender who can offer a suitable loan. For example, if you need a fast turnaround, flexibility on your income assessment or the lowest possible rate, they can advise you on which lender to choose.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.