You have probably heard that this is now time for investors to enter the market. The main reason for that is interest rates –interest rates that are unusually low. You may want to start increasing that timeline if you’re considering buying a home in the following year. Right now, interest rates are low enough, and you’ll be able to obtain more now than ever. We are talking about how interest rates affect your purchasing power and why by taking advantage of today’s rates, you can afford to buy more home for less.
With that in mind, it is worth pondering whether you need to make any changes to stay on track. Find out what low rates could mean for four common financial objectives:
Debt relief:
If you have a personal loan, a rate cut may work in your favor, as long as your lender goes through the cut. The financial companies have either partially or in fully lowered their interest rates on variable loans following the rate cut in June 2019. That means that those with changeable loans could now benefit from lower interest repayments. Fixed-rate loans will not change, because the rate has been stuck in for an agreed period.
It usually makes sense to pay out bad debt first (i.e. debt used to pay day-to-day expenditures like credit card debt that you don’t get a tax deduction for in your income statement, rather than debt used to pay for an income-generating asset like a rental property). It is typically always a smart strategy to continue first with the debt with the most substantial interest rate. If you have a fixed-rate loan, crunching the numbers might be a smart way to see if refinancing is worth taking advantage of the lower rates on offer. In addition to estimating how much capital you might save on interest payments, factoring in the break costs related to the existing loan as well as any set-up fees associated with the new loan is also relevant.
Before deciding what is right for you, it’s essential to consider your particular circumstances and goals so financial advice can help.
Buying a home:
If you are buying a property in the market, a reduction in interest is likely to be welcome news. That is because lower rates will affect how more you can borrow and how much you can pay back on your loan. While borrowing more might be tempting, keep in mind that bond yields will start rising and so will your repayments. It is a good idea to check if you can afford the home loan if the rates are going up.
Increase your income:
In general, a low rate environment is bad news for savers with cash in the bank. With interest rates at historic lows, the returns that some financial assets have received are at their lowest point since the mid-1950s, causing some creditors to wonder that their capital could work better for them elsewhere. With little interest to be earned by keeping money in the bank, it may be worth looking at alternative options such as income-generating shares that pay attractive dividends. Other solutions that could make your money function better for you include controlled funds or real estate. Again, these investment decisions carry more risk and will be able to tie up your cash for some time. Be sure to understand any fees that are involved, too.
Ultimately it comes down to what is important to you, what point you ‘re at in life and how much chance you ‘re able to take on possibly higher returns. If you are still a while away from retirement, you may suggest taking on riskier, higher growth investment opportunities such as securities or properties that can help you develop your super balance over time.
PMI Marietta provides brokerage; property management services and brings solutions to all your property related problems. There are many things people consider before investing in properties. We are here to answer all your property related questions. Feel free to contact us at www.pmimarietta.com.
