If buying a house is in your plans in the next few years, it is important that you have healthy finances. We tell you how to create a debt payment plan that will help you achieve your goals.
Why is it advisable to pay off debts before buying a house?
Leonardo González, Real Estate analyst at Propiedades.com , explains that to acquire a home, you must have a good credit history. This will boost your mortgage capacity, as over-indebtedness could bring financial stress to the home.
“A mortgage allows you to have better control over your personal finances. Hiring one while going through a stage of indebtedness is a bad decision, as it could incur delinquency ”, he points out.
The expert indicates that a loan is only an instrument to obtain a house. However, having more debt than you can easily pay will lead to unwanted situations, such as having to sell your new home.
According to the Inegi National Household Income and Expenditure Survey 2020, housing is the main non-financial asset. Even if a home provides some financial security, you should keep your debts to a minimum. The results indicate that 53.8 percent of them are derived from credit cards, nominal and / or personal loans.
How to start your debt payment plan
González believes that a debt payment plan should be based on identifying needs and priorities. In addition, it must be supported by a realistic budget, clearly and precisely taking into account the size of your financial commitments.
To achieve this, it is necessary that you list the credits currently active and the debts with various creditors. Likewise, it details the characteristics of each one considering the amount you owe, interest rate, monthly payment and / or minimum payment.
Afterwards, the analyst recommends prioritizing payments based on those debts with a higher interest rate. To do this, it advises to make a tab where you can:
Align debt to your family budget to differentiate those that are really necessary from those that are not
Evaluate which ones improve credit history
Quantify the interest generated by each one
Weigh the need for each credit and the possibility of paying in cash
Analyze the goods that will not be consumed due to the level of indebtedness
Pay in less time those debts that do not put the finances of the home at risk
Identify the debts you will pay first
Leonardo González suggests considering your income stream in fixed and variable. The former have a higher degree of certainty, so you can come up with a realistic plan. While the latter are useful to anticipate payments or settle prepaid.
"To establish a debt payment plan you must also classify them by terms (short, medium and long), contract term or type of financial instrument," he adds.
Likewise, the expert says that debts to settle in the short term are those that do not have a cumulative cycle, such as interest charges. Therefore, they are easier to liquidate. For instance:
Third party loans
Options for banking products
According to the analyst, if you have credit cards or nominal or personal loans, you can negotiate the debts. For example, unify them to pay them sooner.
"There is also credit portability, which allows changing banks or institutions to continue the contracted financing, but with a lower interest rate," he declares.
When it comes to delinquency, it is possible to renegotiate each debt with your bank or credit institution to complete the payments in a more accessible scheme. And although a new interest rate cannot be agreed, it can be done with the terms and fees for delays, as the case may be.
"To avoid that the delinquency interests accumulate, it is necessary that the payment plan is designed in 'cascade of interests'. For example, make each payment when it is due or cut off ”, concludes the specialist.
Knowing the amounts, payment dates and derived interests will help you comply with your debt payment plan. Consistency and discipline will be your best allies to settle any commitment and avoid financial stress.