3 Strategies to Navigate Rising Interest Rates and Decreasing Serviceability
Dilleen Property Group 2023
Dealing with increasing interest rates and decreasing serviceability is a common concern in today's dynamic financial world. While there's no one-size-fits-all solution, there are three key strategies that can help you handle this situation better and secure your finances. Let's delve into these strategies that can make a significant difference:
Expert Guidance: Speaking to Your Broker
When interest rates go up and you're dealing with decreased serviceability, seeking advice from a mortgage broker is essential. A professional broker can carefully analyse your current financial situation, diving into the details of your finances. This helps them create a personalised plan that fits your unique circumstances. They'll explore questions like whether it's smart to pay off credit card debt, let go of a car loan, negotiate for a higher salary, or factor in potential rent increases.
If you're a returning client, your broker would already have your information, which speeds up the process of making necessary changes. But if you're new to this, be ready to share a detailed financial assessment. With this information, your broker will develop a strategy to structure your financial moves, ensuring you're ready to face the future with confidence.
2. Trim Unnecessary Expenses: Reduce Liabilities
In times of rising interest rates and limited financial capacity, one of the most effective strategies is to cut down on unnecessary debts. This involves a careful review of your financial obligations, including Afterpay, car loans, HECS, and credit card balances. Do you have credit cards with unused limits? It's time to think about reducing or even eliminating those idle cards. Additionally, renegotiating the terms of your existing debts could lead to lower repayment obligations, giving you more financial flexibility and improving your borrowing potential.
3. Explore Lender Policies: Buffer Requirements
Lenders usually require a buffer, typically around 3%, when you're making a big financial move. However, second and third-tier lenders often offer a more lenient 1% buffer policy. Hence refinancing your loans from bigger banks to these alternatives can open up better lending possibilities, mitigating the impact of rising interest rates and tighter finances.
Conclusion:
In conclusion, these three strategies can significantly help your financial situation during these times of increasing interest rates and decreasing serviceability. If you’re looking for experts to have a look at your finances for you, you can speak to our broker Justin Picker here. Furthermore, if you’re looking to build your own property portfolio or need help starting your property investing journey, feel free to contact us here to learn more about our services and investment strategy.
Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.
