The beginning of a new year is always a good time to start afresh and reflect on any changes you may want to make and any goals you want to achieve over the next 12 months.
Whether it’s getting fit, changing jobs or being better with money, for many people, January is the month for setting objectives for the year ahead.
For those who may have overspent during the Christmas period, the start of a new year is a good time to think about paying off any credit card or overdraft debt they may have accumulated over the festive season and getting their finances back on track.
Christmas can prove to be extremely costly and financially overwhelming for many people and it is easy to overspend when we are constantly bombarded with advertising campaigns encouraging us to splash the cash in the weeks leading up to Christmas Day itself.
Whether this is on gifts for friends and family, Christmas decorations for the home or food and partywear for the big day itself, the financial pressure that sits alongside the festive season can make it extremely difficult for people to manage their finances and stay within budget.
If you are one of those people who has started the new year carrying some Christmas debt, your New Year’s goal may be to be more mindful of your spending habits and improve your finances and credit rating in 2024. This is particularly important if you are looking to take out a mortgage.
How to manage your credit to improve your mortgage prospects
For example, regular use of Buy Now, Pay Later schemes and frequently maxing out credit cards can all have a negative impact on your credit rating, even if you are the kind of person that pays off the balance in full every month.
This is because some lenders may take the view that you are using credit to finance everyday living costs and will question your ability to repay a larger loan.
In the current economic climate, dipping into your overdraft or frequently using a credit card can be both a useful and easy way to regularly manage your cash flow but it is important to try to keep the balance below 80% of the credit limit to minimize the impact on your credit rating.
Debt consolidation and remortgaging
If you feel the use of credit is becoming a regular occurrence however, and are looking for ways to consolidate your debt, speaking to a specialist and seeking support could help you get your finances back on track.
For example, if you are a homeowner on a variable rate mortgage, it may be worth speaking to a mortgage broker about remortgaging onto a fixed rate product or extending the term on your current mortgage to reduce the monthly payments and gain greater certainty over the payment amounts.
This can help you budget more effectively and will enable you to use any disposable income to clear any overdraft or credit card debt.
Remortgaging can also be an effective way of releasing the equity in your home to pay off larger debts or consolidate existing loans into one more manageable payment, particularly if you are approaching the end of your current deal.
Seeking advice is important as some mortgages come with an early repayment charge if you leave the deal before it ends, so speaking to a broker will ensure you get the advice you need before making any decisions that could result in further expense.
If you are considering taking out a mortgage in 2024 or want to discuss your current mortgage offering and explore ways to get on top of your debt, a specialist mortgage broker like Clever Mortgages can offer you the support and assistance you need to help you get back on track.
Sarah Tinkler is a mortgage broker at Clever Mortgages
