Why Your Christmas Spending Won't Hurt Your Mortgage Application.
As we approach the festive season, many Kiwis are caught between the joy of holiday celebrations and the anticipation of purchasing a home in the coming year. If you’re planning to buy a house in 2025, you might be wondering whether your Christmas spending could impact your mortgage application. In this week’s update, we’re here to put your mind at ease and explain why you don’t need to skimp on the Christmas cheer to secure your dream home next year. We’ll debunk myths about seasonal spending affecting your mortgage application, and provide practical tips for balancing your holiday joy with your future homeownership goals.
Christmas Spending and Mortgage Applications
Now, let’s address the elephant in the room – your Christmas spending. Here’s the good news, as of July 31, 2024, the New Zealand Government relaxed the Responsible Lending Code rules under the Credit Contracts and Consumer Finance Act (CCCFA). The updated code now gives lenders more flexibility in determining loan eligibility. It acknowledges that while some expenses like repayments or insurance premiums are fixed, discretionary expenses such as takeaways and your holidays can be reduced or eliminated. This means that your Christmas spending in 2024 is even less likely to impact your home loan application in 2025. We’re well-versed in these new regulations and can guide you through the application process, ensuring that your seasonal splurge doesn’t negatively impact your home loan application. Here’s why:
1. One-Off Expenses Are Viewed Differently
Lenders and mortgage advisers understand that Christmas is a unique time of year. The spending associated with it is typically considered a ‘one-off expense’ rather than a regular financial commitment. This means we can often explain and mitigate its impact when assessing your financial situation for a mortgage application.
2. Focus on Long-Term Financial Health
When evaluating your mortgage application, banks are more interested in your overall financial health and long-term spending habits. A temporary increase in spending during the holiday season is unlikely to overshadow a solid financial track record throughout the rest of the year.
3. Time is on Your Side
If you’re planning to buy a home in 2025, you have time on your side. Most lenders look at your financial behaviour over the past 3-6 months when assessing a mortgage application. By the time you apply for a home loan next year, your Christmas spending will be well in the past.
Tips for Balancing Christmas Joy and Future Home Ownership
While we can help mitigate the impact of your Christmas spending, it’s still wise to approach the holidays with your future home ownership goals in mind. Here are some tips:
How We Can Help
As mortgage advisers, our job is to present your financial situation in the best possible light to lenders. We understand the nuances of different banks’ criteria and can guide you on how to structure your finances for the best chance of mortgage approval. When it comes time to apply for your home loan, we’ll work with you so we can explain any seasonal spending spikes and focus on your overall financial stability. We can help you choose the right lender and loan product that suits your circumstances, potentially saving you thousands in the long run. So go ahead, embrace the joy of the season. Your 2025 home buying journey is in good hands. Merry Christmas and happy house hunting!🎄
Cheers
Rodney