Black Friday – If you buy now will you REALLY pay later?!

Posted by & filed under First Time Buyer, House Hunting, Housing, Lifestyle, Mortgage, Moving Experience, News Round, Property Purchase, Property Search.

The UK seems to be being swept up in a whirl of anticipation and Black Friday mania. If you think back three years, the vast majority of the population had never heard of the US post-Thanksgiving sale (roughly their equivalent to a Boxing Day sale) but now it’s being mentioned whenever you turn on the TV or radio.

PC World_Black FridayThis year it’s reported that ASDA won’t be taking part, following the scrums last year over discounted TVs, and lots of high street plus online brands are spreading their offers over the week. We will see tomorrow what happens on the big day itself.

Without meaning to sound like the early arrival of Scrooge, please do try to be careful not to get caught up in the hysteria and excitement of grabbing ‘a bargain’ and only buy what you need or can afford. This is especially important if you are planning on applying for a new mortgage or remortgage in the near future. It’s likely that, as part of the application process, your expenses and lifestyle will be put under the microscope, and excessive over-spending could potentially count against you. It’s also worth remembering that when determining affordability, and maximum loan amounts, the lender will look at commitments such as HP, credit card, and loan payments. There’s a possibility that this is an area where you could really get it wrong:

Example:

Joint application where client one earns £30,000 per year, and client two earns £20,000 per year.

The couple have 1 child, and pay nursery costs of around £6,000 per annum. The only other expense is the car finance which is £200 per month.

I have just looked at the online affordability calculators of three different lenders, which indicate that a 25 year repayment mortgage could be offered (based on above) for between £165,750 and £189,400.

Now let’s imagine that the couple go out in the Black Friday sales, and they decide to buy a sofa and a new bed because they can get great deals. The sofa costs £750 & can be taken on 0% finance over 3 years at £20.83 per month, and the bed costing £600 is also taken on 0% finance for 3 years at £16.67. For only £37.50 per month the couple now have a new sofa and bed, and they are delighted!!

In January they go to see their mortgage advisor, which I’d hope would be me of course, because they want to move house. I’m afraid that there’s bad news, and I’m the one that has to break it. When we run the figures through the affordability calculators we discover that the maximum possible borrowing has now reduced to between £163,750 and £184,000. The effect of spending £1,250 on Black Friday is that the couple have up to £5,400 less that they could spend on a new house!!!

Final little point to remember is that it may be worth using your credit card, especially if you buy from a retailer you don’t know:

  1. You benefit from extra protection offered by Section 75 of the Consumer Credit Act. On purchases of £100+ the card provider becomes jointly liable for the sale, which could be useful if the retailer goes bust and you have issues with your new purchase.
  2. Some credit card providers also offer a purchase protection system, meaning that if goods are lost or stolen within a fixed period you can get the money back from the card company.

Black Friday could be great if you were planning a big or pricey purchase, such as a new TV, game station, and I’ve seen special offers on cars!! If you weren’t planning to get any of those things then don’t get carried away & run up a big bill, because the excitement may be short lived and you don’t want to buy now and really pay later.

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