Avoid Mortgage Stress in 3 Simple Ways

How can you avoid Mortgage Stress?

Avoid mortgage stress with these tips

Mortgage stress occurs when a household finds difficulty in paying bills and meeting debt repayments.

Much like the rest of the Australian economy, many home owners have taken a hit from the disruption caused by COVID-19. With unemployment at a rate of 7.1% in early June this year, and many businesses struggling to cope with everyday operations, a lot of households are tight-pressed to meet their existing mortgage commitments. Mortgage stress is creeping up among borrowers.

So what can you do to avoid the stress of not meeting repayments?

 

Reduce your repayment to the minimum amount

Since variable rates have dropped in recent months there’s a possibility your repayments have room to move.

Many borrowers continue to pay more than the minimum amount, especially if on a variable rate. Touch base with your lender to see if you’re paying more than you need to in a tough time, and reduce that to the minimum required.

 

Switch to interest only (IO) repayments

Some lenders are offering temporary assistance for borrowers to switch their repayments to interest only (IO). This helps reduce the repayment amount but you won’t be paying any principal off your loan.

Discover the difference in repayments between Principal and Interest, and IO repayments using our calculator.

Keep in mind in most cases IO repayments can only be in effect for a limited time. Check with your lender about their policy on your type of loan.

 

Refinance to another lender

With the current record low cash rate of 0.25% and increasing amount of Aussies looking to save money during the current crisis, the Australian Bureau of Statistics reports the number of refinance enquiries has spiked by 26% in the last 3 months. Lenders are offering home loans at all time low interest rates and the saving potential refinancing to another lender is huge.

Refinancing to a more competitive interest rate can save you money and ease the financial stress your mortgage may be giving you.

Imagine you have a $400,000 loan on an interest rate of 4.09%. It could be difficult to meet those repayments in the current situation. But refinance to a lender offering a variable 2.59% would save your $345.47 a month. That’s over $4,200 a year in your pocket simply made by refinancing.

You can calculate your potential savings with the mortgage repayment calculator.

 

Check with your lender to see what options are available to you. If you’re thinking about refinancing, our Finance Managers are ready to take your call on 07 5619 7222