With interest rates set to increase during the upcoming months, many of our valued clients have reached out to us concerned about the effects this might have on their existing home loan or investment property loan, and borrowing capacity.

What can you do to mitigate the effects of rising interest rates to ensure you can still borrow the loan amount you need to purchase your dream home or property?

Here are 6 tips to help you maintain and even increase your borrowing capacity even during challenging times!

1. Have a look at your living expenses

   Managing and reducing your living expenses will make a great contribution to maintaining and increasing your borrowing capacity. Avoiding things like Afterpay can assist you in maximizing the savings you are making on your living expenses.

2. Eliminate expensive debt

   Reducing the limits on your credit cards can be helpful to improve your position. Eliminating debts with higher interest rates than your home loan is also a good idea. Consolidating your existing debts into a cheaper debt like a home loan is also a good way to improve borrowing capacity.

3. Extend the term of your loan where it makes sense

   Extending the term of different loans that are not your main priority will take the pressure off. It will reduce your repayments enabling you to have more cashflow. The extra cashflow can go towards your main loan ultimately increasing your borrowing capacity for future borrowings.

4. Avoid interest-only terms

   Interest-only terms on your loans require you to repay the whole loan over a 25-year term rather than a 30 year period. This results in an increase of repayments and a consequent decrease in your borrowing capacity. Eliminating or reducing these loans might result in repayments that are a bit higher in the present. But, it will ultimately allow you to have a higher borrowing capacity.

5. Save more money

   With great savings comes the ability to pay a higher deposit for your home or property. Higher deposits translate into the need to borrow less money against the value of your next purchase. As a result, this would achieve lower interest rates, and consequently lower assessment rates at the moment of applying for your home loan!

   Learning how you can negotiate a better house price can also decrease the amount you need to borrow. Our team of experts is here to support and guide you through this process too!

6. Find and use a good mortgage broker

   Working with a professional team like our Rise High Mortgage Brokers will significantly maximise your borrowing capacity. Our team has your best interest in mind and a variety of lenders for you to consider. We will give you personalised advice and assess which lender is best suited for you. This ultimately brings you the confidence and expertise you need to make the best financial decision towards your homeownership and financial goals!

If you are looking for more advice regarding Interest rate rises make sure you check our blogs on rising interest rates and your loan’s pre-approval or follow through with this article on Fixing your loan to avoid Rising Interest Rates. You can also learn more about refinancing, getting ahead financially and all things finance and property on our Rise High TV channel!

Any questions or comments? Contact us here or leave us a comment below!