Haven Accountants and Financial Advisers

Home Blog How to get on top of your short term debt
How to get on top of your short term debt

 

If you are saving for a deposit to buy your first home, tackling your debt is crucial before you start applying for a mortgage. This is because banks and lenders want to be confident that you can keep up with mortgage payments. Looking at your debt can be overwhelming, so we’ve got some tips to help you get on top of your short term debt.

Review your debts

If you have a few debts to pay, the first step is to focus on repaying one debt at a time. There are two ways you can do this.

1. Starting with the debts that have the highest interest rates helps to reduce the ones that are hurting you the most. This approach saves you more money by reducing the amount of interest you are accruing.

2. Another approach is to start with your smallest debt. Looking at your largest debt can be intimidating for some, so working with your smallest debt first gives you enough motivation to start ticking off your list. It may not be the fastest method, but it helps you to get underway.

Create a realistic budget

Budgeting is a great way to reduce spending and pay off your debts faster, but it’s good to be realistic with your budget. If you don’t give yourself any wiggle room, you can be unhappy with a tight budget and end up overspending. Reviewing your budget weekly to see where under or overspending occurred keeps you on top of your expenses.

Get some help

Paying off your debts can be a daunting task. Getting some professional advice on getting your debts under control before you apply for a mortgage can help put your mind at ease. Our mortgage experts can sit down with you and look at your current situation. They can advise you on exactly what banks and lenders look for in your finances when buying a first home.

Celebrate your win!

Paying off your debts can be challenging, but you’ll feel overjoyed when you pay off the last bit. It’s important to celebrate this win after the hard yards, so treat yourself to a small celebration before adjusting your budget to contribute more to your deposit.

 

Want to chat about buying your first home?

Get in touch with us!