How to avoid mortgage stress

How to avoid mortgage stress

Many people make the mistake of borrowing whatever the bank says they can afford and often don’t take time to consider what this will mean in terms of the ongoing financial commitment. The common definition of “mortgage stress” is where you spend more than 30% of your pre-tax income on your home loan repayments. This kind of commitment puts you in the danger zone. According the recent stats from the Australian Bureau of Statistics, using this criteria, approximately 3 in every 10 mortgages meet this definition.

Help! This is me

Firstly, don’t panic. In recent years, particularly during the housing boom, many of us were lured in to the property market and bought outside of our price range. Over time, things start to compound as each month, you struggle to keep up with your mortgage repayments as well as your normal living expenses.

We are here to help

There are typically two scenarios you need to consider to get rid of mortgage stress.

The first is to not put yourself in that position in the first place. If you are currently looking around for a property, speak to us first. We can help you work out a simple budget and include your normal living expenses as well as your mortgage repayments. Starting out with a mortgage repayment that is at a comfortable level will mean that if interest rates rise or your circumstances change, you are less likely to adversely affected and find yourself in mortgage stress.

The second option is for those who already own a home and experiencing mortgage stress. Your options are not as limited as you might think. Many people in this situation soldier on and try to reduce all of their other living expenses. This can have some impact but in reality, if your mortgage is over 30% of your income, then the best way to reduce the stress is to do something about your mortgage. If you would like to talk to us, we can work through what your options might be. Quite often, we can negotiate on your behalf to change your repayments, move you to an interest-only repayment, consider a mortgage holiday or find you a lower interest rate.

The most important thing you can do is act whilst your mortgage is in good standing. Once you start to miss payments or are late, the banks tend to be less flexible. Having us negotiate on your behalf means we can often get access to services that you may not be able to if you go it alone.

So if you or anyone you know is looking like they are in mortgage stress, tell them to give us a call and find out how we can help.