Managing Mortgage Stress

Mortgage stress can affect anyone, regardless of where you live or how much your property is worth. Although interest rates do play a part in creating mortgage stress, more often than not the real cause lies with an unexpected life event; unemployment, illness, injury and relationship breakdown are some of the most common causes of mortgage stress.

Preventing mortgage stress

The best solution for managing mortgage stress is to be put in place strategies to avoid it altogether. Two key areas that can help you manage your mortgage and prevent mortgage stress are:

  • Sit down and create a good budget based on your current financial situation and goals. Consider what is necessary, what is desired and what is truly waste. Remember, you do need to allow some ‘fun’ money in your budget. Use our budget planner to help you get in control on your finances.
  • Try to build a ‘buffer’ into your home loan by making additional repayments whenever possible. This will give you some leeway if you do find yourself in temporary difficulties. You can do this either through making additional payments, or saving additional money into an offset account.

Get help to manage mortgage stress

Talk to your mortgage broker if you are experiencing any issues managing your mortgage.

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There are some great tips for paying off your mortgage faster – thus reducing the likelihood of mortgage stress, at 17 tips to pay off your mortgage faster. You should also consider Life Insurance, Income Protection Insurance or Mortgage Protection Insurance when you take out a home loan, to cover you in the event of illness, injury or

even death.

What to do if you are experiencing mortgage stress

If you do find yourself experiencing mortgage stress, or believe you will soon have trouble making your home loan repayments, you should talk to your mortgage broker straight away. Your mortgage broker can then present your case to your lender for consideration. It’s important to remember your lender will only sell your home as a last resort – financially it is better for them for you to keep your house too!

Some options that you may have available to you to help manage your situation when you are experiencing mortgage stress include:

  • Apply for a hardship variation to extend your loan term, take a repayment holiday, or both. Most lenders offer these. You can read more on our hardship variation page
  • Consolidate debt
  • Refinance your home loan
  • Switch to an interest only repayment option
  • Apply for assistance – some state governments assist borrowers to meet payments that have resulted from temporary shortfalls

It’s important to note that not all options will be available, in many cases it will depend not just on your situation but also the lender your home loan is with. There are also likely to be some fees involved, particularly if you are looking at refinancing.

You should discuss your situation with your mortgage broker and other related financial professionals, such as your financial planner and accountant, before making a decision on your course of action.

In more extreme cases, you may need to consider:

  • Accessing your superannuation to assist you in making your home loan repayments. This requires careful consideration to ensure you don’t lose both your house and your superannuation.
  • Selling your home and downsizing/moving further out of town, or returning to renting for a period of time while you get back on your feet. The sooner you make this decision, the better off you will be.