Tuesday 8th August 2023
With the double whammy of rising cost of living pressures and the Reserve Bank significantly lifting official interest rates to combat inflation, many thousands of homeowners are struggling to make their monthly or fortnightly mortgage repayments.
A broker can help to ease the pain and anxiety of mortgage stress with strategies to get you through the tough times.
Some mortgage holders will worry that the only solution to this situation is to sell the family home. But owning a home is the most important investment of your life and having to sell it at a possible loss would be a dire situation.
Fortunately, there are many things you can do to avert this dilemma and continue to live the great Australian dream of home ownership.
The lending environment in Australia remains highly competitive and banks are always looking to attract new business. A broker can help you obtain a lower interest rate from your lender which will result in reduced loan repayments, or you may be able to refinance with another bank on a better deal.
While the banking watchdog APRA has been expecting lenders to enforce a three-percentage point serviceability buffer for new or refinanced loans, some banks have recognised the challenge this poses for many borrowers and have lowered the buffer to just one per cent for those with a reliable repayment history.
Brokers can also assist mortgage holders by contacting their lender and extending their loan terms to help reduce the repayments. Another strategy is to switch from principal and interest (P & I) to interest only payments, although like extending the loan term, this should be a short-term measure as you will be increasing your total repayments.
Tackling mortgage stress will also require some self-discipline. Stick to a strict budget and cut discretionary spending on things like eating out, making unnecessary purchases on the credit card and other lifestyle changes. If you have been hitting the credit cards too hard, try and consolidate your high-interest debt into the home loan. A broker can assist with all of these changes and take the stress out of being a mortgage holder!