If youâ€™re experiencing â€œmortgage stressâ€, itâ€™s likely that youâ€™re paying more than 30% of your income towards your home loan repayments. Youâ€™re probably struggling to do that as well as pay all your other bills on time.Â 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, weâ€™ll give you some tips on what to do if youâ€™re in mortgage stress, as well as how to avoid getting into that situation in the first place.
What to do if youâ€™re in mortgage stress
Tip 1: Do (or re-do) a budget
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 youâ€™ll be able to cut back on the most without affecting your lifestyle too much.
Tip 2: Negotiate with your lender or consult a finance professional
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.
How to avoid mortgage stress in the first place
Tip 3: Donâ€™t borrow too much
Donâ€™t over-extend yourself. Interest rates
in Australia are currently at record low levels and it can be tempting to think theyâ€™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.
Tip 4: Pay more than your minimum repayments
Itâ€™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
Tip 5: Take out life and income protection insurance
Life insurance can help you to repay your home loan if you die so you donâ€™t leave your partner saddled with debt. Income protection insurance will cover you if you ever lose your job or become sick and canâ€™t work.
Tip 6: Avoid other types of high-interest debt
Credit cards and personal loans have much higher interest rates than home loans.
Tip 7: Start an emergency fund
Start putting a weekly amount into an emergency fund so youâ€™ll have some spare cash available when you need it.
How we can help
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 youâ€™re looking to take out a home loan
or to refinance
, weâ€™ll take the time to understand your needs and goals so we can provide you with the best possible advice.
CallÂ 1300 707 955
Â or emailÂ firstname.lastname@example.org/backup
Â to find out how we can help you, and to secure your free consultation with a finance expert.