Most analysts are tipping another hike of 25 basis points in the next 6 months as the Reserve Bank tries to contain surging inflation. As a result a record number of Australians will suffer mortgage stress and face difficulty in paying their mortgages this year. Regrettably a percentage of these risk repossession of their homes.
Home loan stress or Mortgage stress is defined as spending more than 30 per cent of the household income towards servicing the mortgage.
What should you do if you find you are unable to cope with your mortgage repayments because rates have risen or your circumstances change?
If you fall behind on your mortgage payments, you need to take action straight away. In some cases, the problem can be solved if you act quickly. Many lenders charge penalty fees if you miss payments. The sooner you deal with the situation the more options you have, and the less chance that you will lose your home.
If you have difficulty paying your mortgage (or think that you will have) it's important to talk to your lender as soon as possible.
Don't be put off because you think your mortgage situation is hopeless. There is often a solution!!.
If you haven't yet decided what to do about the problem, contact your lender as they are well equipped to provide you with advice about your options.
Although you will eventually have to pay back the whole of your mortgage, there are several ways that it might be possible to change it to make your monthly payments more affordable. These include the following:
• taking a 'payment holiday' (payments to come from built up available redraw)
• refinancing to a different mortgage product with your existing or another lender (ie: mortgage offset or fixed rate loan)
• adding your arrears to your mortgage and extending the term of your existing loan (this can generally be done by a simple variation but you will incur some costs
• reducing or stopping your capital repayments temporarily (ie if you are in a principal and interest loan the repayments on your mortgage are obviously higher than if they were interest only. Most lenders will allow you to convert from principal and interest to interest only mortgage repayments if this will help you manage your mortgage repayments better.
The best solution usually depends on the type of mortgage you have and your personal circumstances, By utilising our mortgage calculator you can work out how much you can afford to pay each month and how many years are left on your mortgage.
Don't wait until the debt becomes unmanageable and the lender has commenced repossession proceedings.
Vicky Edema has been the Managing Director of Austral Mortgage Corporation since 1992, the company provides an easy to use
mortgage calculator or
loan calculator tools and offers various options for mortgage
refinance.
