3 tips for managing mortgage stress

Another 5 per cent of home owners conceded they would be forced to sell their house if mortgage rates remain high.

Extrapolating the findings, the 27 per cent of unprepared respondents is equivalent to 891,000 people nationwide. For those who would be forced to sell, the number of Australian home owners who could be affected numbers 165,000.

Commenting on these figures, Sarah Megginson, personal finance expert at Finder, stated that Australians hoping for a rate cut have now found themselves “hung high and dry”.

“Many home owners are stretched so thin financially, they’re facing the prospect of having to sell their home, or they’re turning to loved ones for support with paying the bills,” said Megginson.

“With interest rates projected to remain high until next year – and some even calling for a hike in August – mortgage holders could be waiting longer than they expected.”

If interest rates remain high, Finder’s research further showcased that:

• One in 10 (equivalent to 11 per cent nationally) home owners would have to move to an interest-only mortgage.
• 4 per cent would be required to borrow money to meet mortgage repayments.
• 3 per cent would need to rent out a room within their house.
• 2 per cent would be forced to ask for a repayment holiday.

Megginson stated that “financial stress is growing and could be exacerbated by the threat of potential hikes”.

“If you’re struggling to make your mortgage payments, communicate openly with your lender, as they will be able to offer hardship programs such as a mortgage holiday.”

“This can extend your loan term and add thousands of dollars to your original loan amount, so it costs more longer term, but as a short-term strategy it could keep you from losing your home.”

Some other tips for managing mortgage stress, according to Finder, include:

1. Examine your expenses:
   
   Finder first recommended that mortgagors go through their monthly expenses and budget with a fine-tooth comb.
   
   Through reducing the costs associated with luxuries such as takeaway, restaurant visits and more, Finder said that home owners should first look to cut down on any non-essential expenses.
   
   Beyond reducing one’s periphery spending, Finder also said that valuable returns can be made through harnessing a better deal on necessities such as one’s phone plan, internet, insurance, or energy bills.
   
   
2. Review your home loan:
   
   By switching a mortgage over to interest-only repayments, mortgagors will only have to pay interest, as opposed to also making payments on the principal amount.
   
   Even though interest-only loans accumulate more interest in the long term, Finder stated that a temporary switch to interest-only mortgage repayments (12 to 24 months) can provide some helpful short-term breathing room.
   
   Additionally, it was also pointed out that home owners can explore other refinancing options which could potentially secure them a more favourable interest rate entirely.
   
   
3. Improve your income:
   
   Finder advised that home owners should evaluate the range of potential income boosters at their disposal.
   
   Home owners can supplement their income, with weekend ridesharing gigs and renting out underutilised space in a property presented as two options.
   
   Finder also highlighted that downsizing one’s car or selling unneeded valuables can also provide a rapid cash injection.

This insight follows the release of another recent report which relayed the cost of living is beginning to bite, with an increasing number of Australians choosing to swap, scrutinise, or ditch their home insurance policies.