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The dream of owning a home can turn sour if outside events conspire against you, and for many people it seems like this scenario is coming to pass.
So with interest rates climbing higher and property prices cooling off, what can people do to prepare for the pinch? LuxuryProperty.ae – a leading real estate brokerage in Dubai, listed some important points to deal with rising interest rates and falling property values.
Check up on your current deal
Before you panic, you should look at the terms and conditions of the mortgage package to which you’re currently beholden. We’re still in a seller’s market, but focusing on your own circumstances makes sense.
If it’s a fixed rate package and there’s still quite a bit of time left before the term over which the fix was agreed comes to an end, short term fluctuations shouldn’t be too concerning.
On the other hand if you’re on a variable rate deal, then you’re exposed to spikes in interest and might want to think about fixing if possible.
Calculate your repayment options
Whatever your circumstances, it’s wise to work out what might happen to your mortgage repayments if rates continue to rise and remain high for the foreseeable future.
You can try loanDepot’s amortization calculator to determine what a difference even a small shift in rates will bring to monthly repayments.
With this information to hand, it will be simpler to rebalance your household budget according to any price rises that are anticipated. Likewise you can harness this unbiased data to better assess any alternative mortgage packages which you could switch to if necessary.
Consider overpaying
It might sound odd to suggest overpaying on your mortgage when rates are rising, but if you have a fixed rate home loan and you’ve got wiggle room in your personal finances, this could make sense.
The idea is that by paying off more of your mortgage right now, you’ll have a smaller total amount owed when your fixed term arrangement expires. That means if you do become exposed to higher interest rates in years to come, they won’t make as much of an impact.
Get your property valued
While you might have seen stories in the media about the growth of property prices slowing down and even reversing in some regions, that doesn’t mean the same is true of your particular home.
You can use online valuation tools to estimate how much your house is worth right now, and to see how this has changed over the course of your ownership.
However, it’s not a bad idea to get a local real estate agent to provide their own expert valuation, which will be far more accurate than anything that an algorithm-driven website can muster.
Even if you don’t act on the info you receive, just knowing the value of your property is a way to better plan what you might do if the economic screws continue to tighten.
Bolster your credit score
Once you’ve purchased a property, you should still take an interest in your credit score, because this is crucial if you want to refinance your home and get access to the most competitive rates around.
Improving your credit score by paying down other debts, such as on credit cards and auto loans, is sensible.
Conclusion
It’s an undeniably scary time for homeowners, but the fact that you’re reading this means that you want to do something about the wider situation the world is facing, rather than burying your head in the sand.
Planning to cope with interest rate rises and falling property values right now is the best way to weather the storm. It could even lead you to realizing that your current mortgage deal isn’t that good, and that refinancing is sensible.
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