Is your household under mortgage stress?

Are you currently dealing with mortgage stress? Test your mortgage to find out and see if you can improve your situation with our solutions to handle mortgage stress.

Published 1 October 2020

To understand if you are in mortgage stress, let's first take a look at what mortgage stress is. Although there is no official criteria for mortgage stress, it is a type of financial stress that occurs when your mortgage repayments become too high and results in a struggle to pay your bills or other monthly living expenses. A common guideline used to test if you’re in mortgage stress is if 30% of your income is going on mortgage repayments.1

With the Coronavirus pandemic and Australia entering it’s first recession in 29 years, there's no surprise that mortgage stress is becoming more common within homeowners across the country. As of August 2020, data from the DFA has indicated that the overall mortgage stress level is currently sitting at 40.1%, or 1.52 million households.2

If you find yourself currently experiencing mortgage stress or are concerned you may be heading that way, we have three solutions that may help you avoid or lower your mortgage stress.

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Speak to an expert for advice on the right option for you

Mortgage stress solution #1: Refinancing

Refinancing can be a great way to avoid mortgage stress. If your current home loan is no longer in line with your needs and goals due to a change in your situation, it may be worth looking at refinancing your existing mortgage, as an option to determine if you are still receiving the loan that meets your requirements.

Refinancing is the replacement of an existing mortgage with another, this can be with a new or your existing lender. Refinancing can help reduce mortgage stress in a number of ways. 

Most homeowners choose to refinance their mortgage in order to lower repayments and save money. If you’re experiencing financial stress and your home loan has not been reviewed recently there may be an opportunity for you to save on your repayments by refinancing to a lower rate. It is of course important to understand the potential costs involved with refinancing and ensure that a more competitive rate will result in savings for you. 

If you are experiencing mortgage stress due to multiple different bills and debts to pay off, you could benefit from refinancing your home loan to consolidate debt. As your home loan is likely to have the lowest interest rate of other debts, by folding multiple high interest debts into one you may be able to reduce your overall monthly expenses. 

Mortgage stress solution #2: Mortgage deferral

If you have had a sudden change in your situation that has caused you to fall into mortgage stress, such as reduction or loss of income, you may be able to get assistance from your lender on your mortgage repayments. 

If you are struggling with maintaining your current repayments, some of our lenders may be able to offer you a repayment holiday for a period of time. A repayment holiday involves pausing your monthly repayments for an agreed upon amount of time. 

By deferring repayments, you’ll be given the opportunity to ease your mortgage stress by seeing a reduction in your total expenses. This allows you to focus on your situation with confidence that your home loan is not falling behind. 

It is important to keep in mind that interest will continue to accrue during a repayment holiday and therefore while being useful to relieve your financial stress it is not a long term solution for serious financial woes. 

Mortgage stress solution #3: Talk to a broker

We understand that everyone’s situation is different and some of these options may not be viable to you in avoiding mortgage stress. As there is an increasing trend of households falling into financial stress due, it is important to do your own research and get expert advice. 

If you’re feeling overwhelmed or concerned with your current mortgage repayments and believe that you are in mortgage stress, having an expert on your side can be the difference. So contact your local Mortgage Choice broker today to get expert advice on your situation and understand what options are available to you during these tough times. 


Posted in: Financial advice

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1 https://www.ahuri.edu.au/research/ahuri-briefs/understanding-mortgage-stress/
2 https://digitalfinanceanalytics.com/blog/tag/mortgage-stress/