mortgage stress

Owning a home comes with a significant financial commitment and one that can become stressful if the money coming in isn’t enough to cover repayments and other outgoings.

If you’re spending more than 30% of your before-tax income on your mortgage repayments, you’re probably experiencing mortgage stress. Those with mortgage stress find that they’re regularly struggling to afford things after making their regular mortgage repayment.

Mortgage stress isn’t a situation that anyone wants to be in, but there are ways to avoid it. Here are our top tips!

Avoid stretching the budget

When you first get approval for your borrowing amount, you may be tempted to stretch yourself to the maximum and purchase something as close to your ‘dream home’ as possible. You also need to consider the increased debt that you’re signing up for and the higher repayments. 

Giving yourself a buffer will allow you to live comfortably without stressing about interest rates rising or what may happen if you are to encounter a financial emergency in the future.

It is also important to do your own calculations in terms of what you can really afford. The banks may overestimate what you can afford, meaning that you will end up purchasing something that you can’t pay off comfortably. Do some conservative calculations to determine what you’re happy to commit to without pushing yourself to the edge.

Sacrifice on size or location

These days, it is rare that your first home will be the perfect place in the perfect location. If you can’t afford a house in your preferred area, you could consider purchasing a unit or moving to a different location.

Moving regionally is becoming an increasingly popular way to deal with the rising costs of living, especially if working remotely is an option for you.

Making a small sacrifice may allow you to get into the property market without added stress, and eventually, you can look at upsizing or re-locating when the time is right.

Consider rent-vesting to avoid mortgage stress

Another popular arrangement for new homeowners is purchasing a property in a booming suburban or regional location and then choosing to rent inner city. This would allow you the opportunity to get into the property market without sacrificing your current lifestyle. 

When you’re ready to move on, you may choose to move into your property or sell it after the value has increased.

Split your loan between fixed and variable rates

Splitting your loan into two parts (fixed and variable) allows you to have the flexibility of an offset account. Borrowers can choose the percentage split depending on what suits their circumstances.

An offset account can be linked to the variable loan. Any money in this account can be used to offset the balance of the loan and therefore reduce the interest charged each month.

With a split loan, you can also make the most of fixed low-interest rates and locking in a good rate while it is still available.

Get support from a Mortage Broker

One of the smartest ways to reduce mortgage stress is by talking to a Mortgage Broker. Mortgage Brokers work with relevant banks and lenders to find the best home loan option for you. And the best part is that it’s free!

Call our APS mortgage broking experts Tony and Dale on 1300 131 809 to help you work through your options.