Worried about your mortgage? Here’s how to avoid mortgage stress

Mortgage stress is a form of financial stress. If you’re feeling stuck and need mortgage stress help, our ultimate guide to mortgage stress is here to help.

What is mortgage stress?

If you’re paying more than a certain proportion of your after-tax household income (this could be between 25% to 45%, depending on your expenses, and how much you earn), you may be suffering from mortgage stress.

Signs that you might need this help include feeling anxious, pressured or frustrated each time a bill arrives. You may have little or no savings at all. You may run out of money before each payday. In many cases, you may rely on credit cards to make ends meet.

The rise of mortgage stress in Australia

According to Roy Morgan, 17.3% of Australians are suffering from mortgage stress* as of May 2021. Mortgage stress is rising amongst Aussies because the cost of housing has skyrocketed while wage growth has remained relatively flat. The loans Aussies are taking out make up more and more of their income.

Due to the size and duration of their loans, many Aussies feel stuck and need mortgage stress help. They don’t have enough to cover the other costs of living, let alone save or make investments.

In the 80s, house prices were only two to three times the average income putting the dream of owning a home within reach.

These days, house prices are as high as five times the average income and depending on where you live, it may even be more. Buying a home and making the repayments is more difficult than ever, and many Aussies are feeling the pinch.

Why are you experiencing mortgage stress?

Mortgage stress comes from a variety of factors.

You might have borrowed more than you can afford. You might not have an effective budget in place to manage your daily spending. Your home loan could be structured incorrectly.

Whether you’re a low, middle or high-income earner, you’ll have a ton of necessities to pay for such as food, transportation, medical fees, as well as various insurances on top of your home loan repayments.

When each month already sees a huge chunk of your income go to home loan repayments, unexpected expenses can put you under more mortgage stress than you can handle.

These scenarios might include:

• Getting sick or injured, and being unable to work
• Losing your job
• Relationship breakdowns between couples, family, or friends
• Interest rate rises
• Large, unexpected expenses

This makes it necessary to get mortgage stress help as quickly and effectively as possible. That’s where MyBudget can help.

How to avoid or lower mortgage stress

How to avoid mortgage stress tip 1: Create a detailed budget

If you’re wondering how to avoid mortgage stress, a budget is key. Set aside some time to create a detailed budget for the next 12 months.

Your budget will highlight everything you can and can’t afford. It will give you control over your future spending and help you ease any mortgage stress you’re feeling.

Factor everything into your budget. Include every bill, every repayment you need to make, especially your home loan repayments.

Plan to pay more than the minimum required instalment so you have a buffer in case interest rates rise.

Have a think about what you spend your money on and if you’re not sure, look through your past bank statements. Include everything from your groceries, eating out, coffee, insurance, car registration costs through to your medical and transport fees.

When finalising your budget, make sure there’s room for savings and contingency for any unexpected worst-case scenarios which may occur.

By working hard at creating your 12-month budget, you’ll be putting yourself in a position to make better financial decisions. In the end, you’ll be able to ease mortgage stress and feel more confident about your finances. If you’re not sure where to start with a budget, here’s our complete guide to budgeting.

Download our Free Budget Template

How to avoid mortgage stress tip 2: Shop around​

While creating your 12-month budget, you’ll be looking at how much you’re spending on your mortgage, power, insurances and much more.

This is the perfect time to see where you can reduce your costs and in turn, reduce your mortgage stress.

If numbers ever look too high to you, don’t be afraid to look at other providers for a better deal. They’re definitely out there. Ask mortgage providers, “ is my mortgage too high?”
You’ll be surprised by the answers.

Just be sure you ask about exit fees from current providers before you make a switch.

Read our blog post: Save thousands on household bills – The power of shopping around

How to avoid mortgage stress tip 3: Consolidate your debts​

While creating your budget, you may have found multiple streams of debt. Managing so many streams of debt can be time-consuming and contribute to mortgage stress.

One of the biggest aids is to make managing your debts easier, you can consolidate them by bundling multiple debts into one.

Make sure you have a plan to repay it. Sometimes rates jump up after a honeymoon period on a new product ends.

Debt consolidation is not a one-size-fits-all solution, so give us a call and talk through your options. We can adjust your budget to suit your specific needs and goals.

Learn more about Debt Consolidation

Tammy’s tips

• Create a budget that includes all your expenses
• A savings plan and a buffer against interest rate rises
• Use your budget to identify areas to save or cut back
• Makeover your daily financial habits to get ahead

Minimise your bad debts:

• Use cash, not credit, for living expenses and everyday purchases
• If you do use a credit card, pay the balance in full every month
• Buy only what you need, not what you want

Manage your good debts:

• Don’t over-commit yourself
• Pay more than the minimum required instalment on your home loan
• Do your research and make sure you understand that investments are usually long-term propositions

Struggling with stress?

Whether you’re an existing homeowner and wondering, ‘Is my mortgage too high?” or want help on how to avoid mortgage stress as you embark on buying your first home, we’re here to help. We’ll help you put together a new 12-month budget and help you manage your money effectively. We can even consolidate your debts into a single expense stream, and design a payment pay to minimise the costs of your debts.

Even if you’re on top of things, we can help you pay down debt faster and bring you closer to financial freedom.

If you want more information, get in touch today to book your FREE consultation.