If you’re experiencing “mortgage stress”, it’s likely that you’re paying more than 30% of your income towards your home loan repayments. You’re probably struggling to do that as well as pay all your other bills on time. In a worst-case scenario, you could end up falling behind in your repayments and having your home repossessed by your lender.
In this article, we’ll give you some tips on what to do if you’re in mortgage stress, as well as how to avoid getting into that situation in the first place.
Evaluate your spending patterns and look for things you can cut back on.
There are two broad types of expenses: discretionary and non-discretionary. Discretionary expenses are optional expenses, like entertainment. Non-discretionary expenses are essential, like your mortgage payments and food.
Discretionary expenses are the ones you’ll be able to cut back on the most without affecting your lifestyle too much.
Ideally you should do this before you start missing your home loan repayments. You might be able to negotiate a temporary freeze on your repayments with your lender, or to lower your repayments by extending your loan term.
A finance professional will be able to help you come up with strategies to beat mortgage stress.
Don’t over-extend yourself. Interest rates in Australia are currently at record low levels and it can be tempting to think they’ll always stay that way. Even a small increase in interest rates could make a big difference to your repayments if you borrow a large amount.
It’s smart to get ahead of your repayments if you can while interest rates are low. That will give you a cushion for the future
Life insurance can help you to repay your home loan if you die so you don’t leave your partner saddled with debt. Income protection insurance will cover you if you ever lose your job or become sick and can’t work.
Credit cards and personal loans have much higher interest rates than home loans.
Start putting a weekly amount into an emergency fund so you’ll have some spare cash available when you need it.
At Fast Repay Home Loan, we help our clients to implement strategies so they can become debt-free and own their own homes as soon as possible. Whether you’re looking to take out a home loan or to refinance, we’ll take the time to understand your needs and goals so we can provide you with the best possible advice.