Mortgage Stress: Are you feeling the pressure?

What is mortgage stress?

There are many different kinds of financial stress, and mortgage stress can be one of the most debilitating. Mortgage stress is defined as when you are spending more than 30% of your pre-tax income on your home loan – which is absolutely huge. Not being able to cover the cost of your mortgage repayments can make you feel pressured, frustrated, stressed and anxious, and make you dread receiving bills.

How common is mortgage stress?

Here in Australia, a lot of people feel paralysed with the size and duration of their home loans. Since the 80s, house prices have gone from only two or three times the average income to more than five times the average income. This means that buying a home and making the repayments are so much harder than they’ve ever been, and affect many people across the country. Wage growth stagnating and house prices skyrocketing has meant loans are taking up more and more of people’s income, and making mortgage stress a very real problem for a lot of Aussies.

Why does mortgage stress happen?

Mortgage stress happens for a number of reasons and can creep up on you slowly. Whether you are in the top, middle or lowest income bracket, we all have a huge amount of unavoidable payments to make such as medical bills, food, transport and basic spending. This can all add up quickly, and when you factor in the huge chunk of your income that your home loan takes up, you may be scraping the bottom of your wallet already. On top of this, being hit with an unexpected expenditure event such as your car breaking down, your pet needing vet bills paid for, losing your job or interest rates rising can really push you over into severe mortgage stress.

How can I avoid mortgage stress?

There are a number of things you can do and put into place to avoid mortgage stress. Here are our top three:

1. First and foremost, having a solid, honest budget that takes all of your expected spendings into account gets you on track to understand how much you have and how much you need. Using cash you have rather than credit for everyday purchases, buying only what you need and not always what you want, and tracking your spending habits are all marks of a strong budget that can help protect against mortgage stress.
2. Second, having a Silent Saviour or strong cash reserve can help buffer you against that unexpected expenditure that pops up. If you stay on top of things from the start and get yourself into a strong position at the beginning, you are less likely to have mortgage stress creep in and your repayments to rise.
3. Thirdly, understanding your home loan and interest rate can help you be prepared and avoid over-committing yourself. By understanding how much you will have to pay back, how long it will take, and the ins and outs of your loan can help you differentiate between investments and pick the right ones that will not put you under financial stress.

What can I do now?

If you think you are suffering from mortgage stress or are about to, give us a call or book a 30-minute coaching session with us. It’s free to have a chat to us, and if we can’t help you, we will put you onto a debt specialist who can.

Have some questions? Want to know how it applies to you? Want a review of your personal situation? Click here to book a Free 15 Minute Discovery Session, give us a call on 1800 577 336, or email us at hello@wealtheon.com.au.