How to lower mortgage stress

How to lower mortgage stress

Data Finance Analytics has released new data that says around 29.7% of Aussie households are feeling the pinch of mortgage stress. 

So, what exactly is mortgage stress? And what steps can be taken to alleviate the pressure? We’ve taken time out to address this important issue.

What is mortgage stress?

According to the Australian Financial Review, mortgage stress is when the net income of a borrower does not cover ongoing costs, including mortgage repayments. 

With 921,000 Australian households feeling the crunch of mortgage stress, this issue needs to be taken seriously.

At Capita, we take measures to ensure you don’t take on a mortgage you’re unable to handle. This means we look at what your repayment capacity is, and only recommend finance options that are within your budget. 

Overstretching, even if it’s only by a small amount, can have a big impact on your life, and your finances. Considering the term of a mortgage can be as long as 30 years, it certainly makes sense to only commit to a sustainable home loan solution.

If you are feeling mortgage stress, the first thing to realise is that you are not alone. You are in no way a failure, and there are ways to lower your stress, and work towards making your repayments more easily. 

Here are some tangible tips to get you started.

How to lower mortgage stress

1. Prioritise your debt 

Write a list of all the debts you currently have. Include the following information:

  • Type of debt e.g. home loan, personal credit card.
  • How much is owing on each debt.
  • The interest you are currently paying on each debt. 

Your most important debt is your mortgage, so make this the priority. Then, move to paying off the debt with the highest interest rate or the debt with the least left to repay.

Pay off minimum payments on the less important debts, so you can focus on the ones that matter most. Work your way down the list.

While this won’t solve all of your debtor problems right away, it will give you a sense of awareness and control over your circumstances.

There is power in knowing what you need to prioritise, and in working out what can be dealt with a little later. As a result, you should feel less overwhelmed by your situation.

2. Roll multiple debts into one

If you have multiple debts, consider taking out a loan to pay off all the debt at once. Then focus on repaying the single loan.

Of course, this will only work if you can pinpoint a loan with a better interest rates and terms than the ones you are currently paying off.               

Perhaps you only need to get a loan to cover the debts with higher interest rates. Then, continue paying off the other loans using the method outlined in Step 1.

A good mortgage broker can help you consolidate your debt, by helping you discover more suitable debtor finance options.

3. Talk to your lender 

If you have gone through the steps listed above and are still struggling to make ends meet, we recommend speaking to your lender direct.

The Australian Government’s ASIC Money Smart website states:

If you are finding it hard to meet your loan repayments (for example, because of illness, unemployment or changed financial circumstances), you can apply to your lender for a 'hardship variation' which changes the terms of your loan.

The website also offers information on how to apply for a Hardship Variation with your lender.

Are you saving as much as you could be?

Another way to save more on your home loan is to engage in a home loan ‘health check’. This only takes an hour or so, and could potentially save you thousands over the term of your loan, if you have one per year.

Our mortgage brokers will look at your existing loan, then research other finance products to see if a more suitable option is available.

This doesn’t just involve comparing rates. We also make sure your loan matches your current circumstances and financial goals, which means it works harder for you in the long term and saves you more.

Get a home loan health check now.

Financial Advice Disclaimer: This information is general in nature. Mortgage brokers do not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner.