Common Causes of Mortgage Stress
If you are spending more than 30% of your net income on your mortgage repayments, then you may be under mortgage stress. For most people, mortgage difficulties will more often than not come as a result of an unexpected life event. Unemployment, injury, illness and even a relationship breakdown, may all contribute to difficulties in meeting mortgage repayments.
Preventing Mortgage Stress
This is a two-fold process that involves getting a personalised mortgage structure from the beginning that takes into account any future changes (both to your situation and with regards to interest rate rises). You should also build a buffer from the very beginning by making extra repayments (see paying off your mortgage faster).
Managing Mortgage Stress
If you are experiencing mortgage stress and believe that you may default on a repayment, your first course of action should be to contact your lender. Your mortgage broker can then explain your options and negotiate a more convenient loan repayment structure.
Some of the options your mortgage broker will discuss may include:
- Mortgage hardship variations.
- Repayment holidays.
- Debt Consolidation.
- Switching to an interest only repayment structure.
- Apply for government assistance.
- Extend the term of your loan: This will reduce your immediate monthly repayments but will result in a much higher interest bill in the long run.
- Get a lower rate loan with no ‘bells and whistles’: You may be able to reduce your interest rate by switching to your lender’s basic variable loan.
- Refinance: This could help you access a lower interest rate or a mortgage product with lower fees. There are risks involved with a refinancing strategy, make sure the costs of the refinance (exit fees and set-up fees) do not outweigh the benefits.
- Access your super to make your repayments: This should only be done as a last resort and requires careful consideration as risk loosing both your home and your superannuation.
More information and home loan help
For more information on how and where to find a better home loan deal from an extensive panel of Australian banks and secure mortgage lenders, or to speak to your local area mortgage expert, contact us on 13 LOAN (direct +61 2 9249 3739)
