The term “mortgage stress” is currently used to refer to the experience a homeowner feels when they’re spending more than 30% of their income on the repayments for their home loan. When funds are low, and homeowners are being forced to live beyond their means, they’re more prone to anxiety and panic.
As interest rates continue to rise, we do our best at Home Loan Cash Back to help you minimise the strain of your mortgage. By helping you to find the best deal for your unique needs, and ensuring that you get regular cash back on your mortgage payments – we can make mortgage life less overwhelming. Unfortunately, 35% of Australians are still experiencing this phenomenon. So, what can you do to manage the pain of mortgage stress?
1. Change Your Mortgage
If you’re struggling to afford the monthly repayments on your mortgage, this could be a sign that your interest rates are too high, and that you could benefit from refinancing. Consider how long you’ve spent on your existing mortgage rate, and whether you’d need to pay any costly exit fees to switch to something new. Sometimes, you’ll find that simply comparing the market, and refinancing your loan to a more competitive provider could save you hundreds of dollars a year in your loan repayments!
2. Consider an Interest-Only Loan
Ideally, interest-only loans should only be considered if you’re seriously struggling with paying your bills. Interest-only mortgages mean that you’re only paying off the interest that accumulates on your debt, rather than putting anything towards the capital of your loan. That means that when your loan term is over, you may still have money to pay. However, if you’re in a tough spot, an interest-only loan will reduce your monthly outgoings. This could mean that switching to an interest-only mortgage is ideal for emergency situations, such as when you lose your job or are struggling to pay an unexpected bill.
3. Know How to Budget
Budgeting might not be the most exciting thing in the world, but it’s crucial for making sure that you have enough money to afford your daily expenses. These days, we’re all struggling to make ends meet, but sometimes sitting down and looking at how you typically spend your money can help you to reduce any dangerous spending that could be harming your ability to make your home loan repayments. Even simple things, like cutting down on buying coffee on your way to work, or reducing the amount you spend on television channels, could be enough to take the strain off your finances.
4. Make Sure You Buy a House You Can Afford
Many of the problems with mortgage stress present in today’s society happen because aspiring homeowners bite off more than they can chew. While it’s normal to have dreams of a big, beautiful house, you need to ensure that you choose a home that you can reasonably afford to pay for each month. Select a property that’s well within your price range, and give yourself some wiggle room in case interest prices rise, or you find yourself paying out for more than you expected due to the arrival of a new family member, or something similar. Your mortgage broker will help you to identify how much you can afford to borrow based on your average income.
5. Don’t Ignore Problems
Finally, if you think that you might not be able to make your mortgage repayment on time one month, or you know you’re going to start struggling with payments, then contact your lender immediately. Often, lenders are quite understanding when it comes to financial problems, and they will work with you to plan out a repayment structure that suits your needs. However, if you simply miss your payments, then you’ll end up with problems in your credit rating that could damage your ability to borrow credit in the future.
