mortgage stress

The pandemic has been incredibly stressful for everyone. Although the light at the end of the tunnel is now visible, there was so much uncertainty surrounding everything: employment, access to services, and even the supply of goods. Learning how to manage the strain and tension was difficult, especially when paying for mortgages and household expenses. This phenomenon is known as “mortgage stress.”

If this sounds familiar to you, it’s essential to recognise the signs of mortgage stress to learn how to deal with it. Here’s what you need to know about mortgage stress and how to improve your financial situation:

What is Mortgage Stress?

Mortgage stress occurs when a homeowner takes 25 to 45 per cent of their income to pay for their home loan, effectively putting them in an “At-Risk” category. If the homeowner spends more than 45 per cent of their income on mortgage repayments, they’ll be placed in the “Extremely At-Risk” category. According to Roy Morgan, 783,000 mortgage holders were classified as “At-Risk” while 454,000 were categorised as “Extremely At-Risk” by the end of 2020.

These large numbers may be staggering. However, due to the rapid changes that many people experienced in their employment situation, such as reduced work hours or getting laid off altogether, they had no choice but to allocate more of their income to their loans.

The Signs of Mortgage Stress

You could be experiencing mortgage stress without realising it. Mortgage stress doesn’t have a clear definition, as the percentage of income that qualifies a person as under mortgage stress varies significantly on whom you ask. It also tends to look different, but if being worried about meeting future repayments has caused you to skip them, you’re likely experiencing mortgage stress. In this case, you’ll need to meet with a mortgage consultant in Sydney to receive an assessment of your situation and find out what you need to do to improve it.

How to Relieve Mortgage Stress

To start relieving yourself of mortgage stress, check your finances and start auditing them. List every dollar you earn and spend, which involves getting bank statements for the last three months and figuring out how much you spend on utilities, mortgage, transportation, and other expenses. If you spend on non-essential items, figure out how much of it you can reduce and direct to your mortgage payments instead.

Additionally, you may qualify for a refinance mortgage in Sydney. The current RBA cash rate for May 2021 is at 0.1 per cent per annum, a historic low. If you haven’t checked your mortgage rate or terms within the last two years, getting a refinance may be your best option, especially given the favourable rate. With so much competition in the marketplace, you’ll have a wide range of options that will help you decrease your mortgage stress, allowing you to save on monthly payments.

Lastly, the best course of action to take would be to talk to a mortgage consultant, who can advise you on the most effective steps to take. They can help you speak to your lender or direct you towards government programs that help citizens deal with financial stress. 

Conclusion

Mortgage stress has put a strain on many households over the last year, causing them to be financially at-risk. However, by following our guide and consulting with a mortgage specialist, you’ll work your way out of mortgage stress.

Wealthy You is a team of the best mortgage brokers in Sydney, offering various mortgage solutions such as refinance mortgages, bridging loans, and more. We tailor our plans to suit your specific financial needs, making refinancing your home as simple as possible. Contact us today to learn more about what we can do for you!

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