It’s now harder than it was a few years ago to gain loan approval, which is why you need to present the best possible case regarding your ability to service a new loan.

Here are some tips to help boost you serviceability and increase your chances of loan approval:

1.    Shop around – use a mortgage broker to help you find the best rates and most suitable loan products on the market. Keep in mind that it’s not always about getting the absolute cheapest interest rate; after all, what good is it to find a loan that offers a saving of 0.2%, if the bank won’t approve your application in the first place?

2.    Reduce your credit card limits – immediately! Credit cards chew through your disposable income, so reduce them to the lowest amount you possibly can. Then as you pay them off, continue reducing the limits. You don’t need to use round numbers, either – you can reduce a reduction from, say, $2,500 to $1,800.

3.    Eliminate personal debts – however you can. Car loans, store cards, credit cards, personal loans, fast finance debts: pay them off as a priority (if you can afford it), then cancel the cards and accounts as they’re paid. This will free up your income from the bank’s point of view. Alternatively, consolidate them into one more affordable monthly repayment, and cancel all of the cards and credit facilities so you don’t hock up more debt.

4.    Decrease spending – Banks want to see evidence of your financial reliability, so demonstrate that (at least for a few months before you submit your loan application) by reducing your disposable spending on restaurant meals, ubers and cabs, clothes, gadgets and other lifestyle expenses.

5.    Refinance – to extend your loan term on an existing loan. If you’ve had your PPOR loan for 5 years, refinance the current balance over a fresh 30-year period. This will reduce your monthly repayments, and improve your serviceability. Just be sure to keep paying the same higher monthly repayment you were paying previously, so you don’t end up paying a massive amount of extra (avoidable) interest.
 

For the full story, including a full investigation into the credit crisis and strategies to help you get a loan in 2019, read the complete feature article in the March 2019 edition of Your Investment Property magazine.

On sale at news agencies and Coles supermarkets February 14th to March 14th 2019, or download the magazine now.

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