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Serviceability: What Happens When It Runs Out?

Maximising serviceability through property sale for investment growth

When it comes to property investment, understanding your serviceability is crucial. Serviceability refers to your ability to repay a loan based on your income, expenses, and other financial commitments. So, what happens when your serviceability runs out? You can no longer get another loan for an additional property. In simple terms, you’ve reached your borrowing limit. But this doesn’t have to be the end of your investment journey.

How to Maximise Your Serviceability and Financial Position

Running out of serviceability doesn’t mean you’re stuck. There are several ways to improve your financial situation. One option is to sell a property and free up equity to increase your borrowing capacity. Let’s explore some strategies:


Sell Down a Property
If your serviceability is maxed out, selling a property could be a good choice. If you own a property that’s appreciated significantly, selling it can provide the capital needed to reduce debts or purchase a more profitable property.

For example, if your principal place of residence has grown in value, selling it could allow you to avoid paying capital gains tax (CGT). This can give you a cash boost, improving your overall cash flow.

Use the Proceeds to Pay Down Existing Properties
Rather than buying a new property, you could use the money from selling one to pay down your existing loans. Reducing your debt lowers monthly repayments, which increases your serviceability. This could free up borrowing capacity in the future, without needing to sell more properties.

Reinvest in Higher-Yielding Properties
Alternatively, you can reinvest the funds into a higher-yielding property. If you sell a property with lower growth potential, you could buy one in a higher-growth area. This could improve your financial situation long-term by increasing the property’s value or providing better rental returns.

Consider Other Financing Options
If selling isn’t right for you, other financing options are available. You could refinance or get a second mortgage. Restructuring your loans might free up enough serviceability to keep buying. However, this should only be done with a financial advisor or mortgage broker to ensure it aligns with your long-term goals.

Working with Quantum Buyers Agents to Improve Serviceability

Navigating the complexities of property investment and serviceability can be tricky. But you don’t have to do it alone. At Quantum Buyers Agents, we offer expert advice and tailored strategies to help you succeed. Our team can help assess your portfolio, explore options when serviceability runs out, and guide you toward smart investment decisions.

If you’re ready to take the next step or need assistance with your property strategy, visit us at Quantum Buyers Agents to schedule a consultation. We’re here to help you make the most of your investment journey.

Conclusion

Running out of serviceability doesn’t mean you can’t continue growing your wealth through property. Whether you sell a property, pay down debt, or reinvest in higher-yielding assets, there are plenty of ways to stay on track. With the expertise of Quantum Buyers Agents, we can help you find the right strategy, ensuring you reach your long-term financial goals.