Don’t let a holiday splurge delay your dream

With just a few shopping days left before Christmas, consumers who hope to buy a new home next year should be keeping a tight rein on their spending.

That’s the advice of Richard Gray, CEO of Harcourts Real Estate, who says that holiday shoppers worldwide are known to spend between 15 to 30% more than they had originally planned on gifts, holiday accommodation and food.

“But while this would be great for SA’s hard-pressed retailers this year, festive season extravagance could hamper your chances of getting a home loan when January rolls around.”

Because your credit record is so important in obtaining a loan, those who are planning a home purchase early in the New Year should also definitely refrain from opening any new store accounts at this time for major purchases like furniture or large appliances. They should also be very careful not to max out their credit cards during the holidays, he says.

“And they should absolutely not be tempted to take a holiday dip into any savings they have already accumulated for a deposit on a home or transfer costs. Cash is always short supply when you buy a new home.”

To help potential homebuyers stay on financial course this holiday season, Harcourts has the following suggestions:

* Stick to a holiday budget. Write down who you’re buying for and how much you plan on spending – and stick to your list when you go shopping.

* 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.

* Pay off any holiday debt immediately in January. Try to limit credit card use during the holidays, but clear it completely once you receive your first statement of the year.

“And next year,” says Gray, “once you are settled in your new home, you should consider a festive / holiday savings plan in which you set aside a certain amount of money each month specifically for your festive season spending.

“That way, you’ll be able to put your bonus or 13th cheque straight into your home loan account, and start reducing your bond repayment period – which will of course generate huge savings on the ultimate cost of your home. If you pay R10 000 off a R1m home loan, for example, you will cut about six months off your 20-year repayment period and, at the current home loan interest rate of 9,25%, save more than R52 000 worth of interest.”