Should you save for a deposit or pay debt first?

First published 23 July 2020, 12:00 PM

With the excitement that comes with buying your first home it’s easy to forget about getting your finances sorted before you start shopping around.

If you're getting ready to buy a home, debt reduction should be your first priority. Here are some valuable tips for getting your debt under control before you take on a mortgage.

1. Assess your financial situation

Making purchases without determining whether you can afford what you're buying is probably what got you into debt in the first place, and it's important for you to assess your financial situation to locate areas that you can change.

2. Consider consolidation

If you're dealing with types of debt that carry high-interest rates, consolidating these debts into one loan that offers a more reasonable rate can save you money over time. However, it's important for you to be aware of the fees associated with debt consolidation.

3. Avoid new debt

This can be difficult if you're struggling with a tight household budget, but it's important to avoid new debt while you're working on reducing the total amount that you owe. The simplest way to achieve this goal is to stop using your credit cards while you're paying down your current debt.

4. Find new sources of income

You might think that you're doing all that you can by going to work each day, but there are other ways to earn more money. It could be a good idea to get a second job while you're paying down your debt. While it's difficult to work two jobs, it would only be necessary for the short term.