Mortgage Stress

What is mortgage stress?

Mortgage stress is a form of financial stress. If you’re spending more than 30% of your pre-tax income on home loan repayments, it’s likely you’re feeling it.

You may be feeling anxious, pressured or frustrated each time a bill arrives. You have no savings at all. You run out of money just before each payday. And you rely on credit cards to make ends meet.

You’re definitely under mortgage stress if your household income doesn’t cover the cost of your home loan repayments.

If you are, we’re here to help. We’d love to hear from you.

We can help you put together a new 12-month budget, teach you how to spend more effectively and consolidate your debts into a single expense stream.

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The rise of mortgage stress in Australia

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. 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 five times the average income and depending on where you live, it may even be more. Buying a home and making the repayments has never been this hard.

Interest rates haven’t risen in almost two years but when they do, many Aussies will feel the pinch in their wallets.

Why are you experiencing mortgage stress?

Mortgage stress comes from a variety of factors.

You might have borrowed too much. You might not have a budget to manage daily spending. You might have structured your home loan incorrectly.

Because each month already sees a huge chunk of your income go to home loan repayments, unexpected worst-case scenarios may also put you under more mortgage stress than you can handle.

These scenarios can include:

  • Getting sick or injured (and as a result unable to work)
  • Losing your job
  • Relationship breakdowns between family, friends or your partner
  • Interest rate rises
  • Large, unexpected expenses

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

This makes it necessary to find ways to lower mortgage stress as soon as possible.

?How to lower mortgage stress

If you’re experiencing intense mortgage stress right now, there are a variety of ways to reduce it. Here’s how.

1Create a detailed budget

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.

2Shop 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.

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

3Consolidate 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.

To make managing your debts easier, you can consolidate them by bundling multiple debts into one.

For example, you could consolidate debt across multiple credit cards onto one card that offers a 0% balance transfer.

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

Tammy’s mortgage stress 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
  • 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
  • Don’t over-commit yourself
  • Pay more than the minimum required instalment on your home loan
  • Do your research— make sure you understand that investments are usually long-term propositions. Some investments perform better than others

Are you struggling with mortgage stress?

If you are, we’re here to help. We’d love to hear from you.

We can help you put together a new 12-month budget, teach you how to spend more effectively and consolidate your debts into a single expense stream.

Enquire Online