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Buying a home

Can Christmas debt affect home loan approval?

18 November 2019

Christmas may be the most wonderful time of the year, but it can also be the most expensive. According to Finder, collectively Australians spend $25 billion on Christmas. Queenslanders each spend an average of $1,275, just below the national average of $1,325. There’s no doubt about it – those lavish gifts, huge family dinners and Boxing Day road trips don’t come cheap. But some preparation now can help ensure you start the new year in a new home, instead of filling your stocking with post-Christmas debt.

Christmas debt

Since the Royal Commission, lenders are looking even closer at applicants’ expenses, with most asking for at least three months’ worth of bank statements. So, if you want home loan approval before April, you’ll have to fight the festive frenzy and stick to your Christmas spending budget. Demonstrating good savings habits is crucial when buying a home. Making sure you continue to build your deposit over the holiday period and not spending this “extra cash” could be the difference between your home loan being approved or not.

Credit card debt

Using your credit card can be a convenient solution to ease the financial stresses of the festive season. When applying for a home loan, it can be a helpful tool to improve your credit rating and show lenders you’re a responsible borrower. But what many people don’t know is lenders don’t just look at your credit card balances and repayments. What’s also important is the credit limit of each card. So, if you have a card limit of $5000, to your lender, you’re $5000 in debt - even if you haven’t spent that amount! This extra debt can have a significant effect on your borrowing capacity.

Suncorp’s borrowing capacity calculator could help give you an idea what your borrowing capacity may be.

Explore the borrowing capacity calculator

Ways to save

Here are our top tips to help you combat Christmas debt and see you in your own home sooner.

Christmas spending budget

It’s natural to want to give generously to loved ones at Christmas time. But If you’re saving for a home, it’s important to be realistic about how much you can spend without eating into your savings or overusing your credit card. Make a list of everything you need to buy (presents, food, travel expenses, etc) and work out how much money you’ll need. Suncorp’s Budget Planner can help if you need a hand, or there are a ton of budgeting apps you can download to help manage your finances and ensure this Christmas is a not-so-silly season.

The Suncorp App is a great place to start. It has a budget tracker feature that automatically lists your expenses from your Suncorp Bank account and groups them into categories such as ‘Petrol’ or ‘Groceries’.

Gift alternatives

Has your Christmas spending budget left you with less to spend than you’d like? Never fear! There are plenty of great gift alternatives to make sure you don’t blow the budget this Christmas. Why not get crafty and make personalised presents, cards or wrapping paper? Or suggest doing secret Santa with your family and friends? Getting one gift you love is much better than five you’ll never use.

According to Roy Morgan research the number one thing Australians want for Christmas is financial stability. So why not save money by boycotting presents altogether and give to those who are less fortunate by spending time volunteering together or building hampers for families or children in need. There are hundreds of charities all over Australia working tirelessly to support those who are less fortunate this Christmas so why not lend a hand and get involved!

Sale time

A great way to avoid dipping into your savings is to go on a bargain hunt. You’ve got your list, now exercise some patience and shop around. You could jump online to compare prices and search for coupon codes to get more bang for your buck. Subscribing to a store’s mailing list or social media page is an easy way to know when sales are on and you might even get early access to them. But beware - you’ll also be notified when new stock arrives so some self-control might be needed!

Be credit card smart

If you do need to use your credit card this Christmas, lower its limit (if you can) and be sure to pay it off on time. This will stop Christmas debt from following you into the new year and hindering your chances of home loan approval. The same goes for using buy now, pay later services. These can be a helpful way of purchasing presents when you’re trying to save, but these bite-size payments last for a few months so make sure they fit into your budget.

Talk to a home loan specialist

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Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement Product Information Document before making any decisions about whether to acquire a product.

Banking products are issued by Suncorp-Metway Ltd (“Suncorp Bank”) ABN 66 010 831 722 AFSL No 229882. Please read the Product Information Document for Personal Deposit Accounts before opening an account. Fees, charges, terms and conditions apply and are available on request.

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