Avoiding mortgage stress?


What is mortgage stress?

If you’re unable to meet your mortgage repayments and you’re under pressure from your bank or mortgage lender to bring your payments up to date then it’s likely that you’re under mortgage stress.

What are the signs of mortgage stress?

Each person is unique and copes with pressure and stress in different ways. Having financial stress can be debilitating, sapping one’s confidence and bringing relationships under great pressure. Symptoms can be:

1. Physical: with increased aches, pains and ailments, difficulty falling or staying asleep.

2. Emotional: you may feel you’re becoming increasingly anxious and not coping well with work or family life.

3. Mental: you may be exhibiting feelings of withdrawal, loneliness and depression.

4. Financial: you may be depending on your credit card more and more and allowing this debt to accumulate or taking increasingly more cash advances from your credit card.

How can I deal with mortgage stress?

The best way to deal with mortgage stress is to actively engage in strategies to reduce your debts. Below are some suggestions that may help you avoid, manage or eliminate mortgage stress:

Plan when buying a home

If you’re thinking of buying a home, make sure you’ve got a personal budget in place and that you understand the purchase costs and fees involved. You should also consider how you would manage repayments if interest rates increased quickly, if you lost your job or had an unexpected large expense?

Income protection

Income protection replaces regular income in the event of a temporary or permanent disablement due to sickness or accident, and ensures that expenses, like your mortgage, can continue to be paid during your absence from work. It’s important to get your income protection while you’re in a job.

Build a financial buffer

Plan a budget and start saving by putting extra funds into a savings account or into your home loan. Having a buffer will give you confidence as well as the extra funds to stay on top of your commitments.

Consider changing your loan to a introductory loan and make higher payments right from the start so that you’re paying down the principal component of the loan. Or, change to an interest only loan with the option to make unlimited extra payments. Pay in extra funds whenever you can from your tax return, bonuses or savings made by prudent budgeting.

Don’t borrow to the limit of your servicing capacity

Just because a lender gives you a certain limit doesn’t mean that you should extend yourself to that limit. Be circumspect, start small, pay down the loan and then upgrade.

Reduce your credit card commitment

Keep you credit card under control by paying it off, in full, every month.

Don’t just pay the minimum, pay it off in full!

Lower the limit of your card so that you’re not tempted to spend unnecessarily. If you find it difficult to be disciplined with a credit card, consider changing to a debit card where you have to pay the debt off each month. Or, if you’re really serious, close down all your credit cards and just use cash.

If you’re really stressed about your debt

Think about selling a property to preserve any remaining equity before it’s eroded by the effect of compounding interest. This is a serious step so talk to your finance professional and tax advisor prior to taking action.

Find out about the Aurora Money Mentor Program

The Aurora Money Mentoring Program is designed to educate people about the basics of how money works so that they can take control of their finances and get back on track to achieve their dreams and goals. It’s designed to make money simple – simple to understand and simple to manage!