Make ‘mortgage stress’ feel like a thing of the past with these tried and tested borrowing strategies
Juggling your mortgage and subsidising your lifestyle can be tough. As times change, children arrive, your income can fluctuate and that overseas trip of a lifetime can beckon –so your finances and expenses will change too.
That mortgage you signed up for was affordable at the time; over the years, however, the gap between income and expenditure has widened and what was once affordable is now a struggle.
This common occurrence is often referred to as ‘mortgage stress’. It’s generally defined as where a borrower is forced to spend one third or more of their income on their loan repayments.
So, if you find yourself feeling the pinch due to your monthly mortgage repayments, here are a few ways to keep yourself afloat.
• Extending the life of your loan by five years is a quick and simple way to minimise your monthly repayments. However, you can expect to pay more interest over the extended life of the loan.
• Interest-only repayments will substantially reduce the amount you are required to pay each month. But remember, this strategy should only be a short-term fix as you are not driving down the outstanding amount – the principal – of your mortgage.
• Shop around for a basic loan because you’ll be surprised how much money you might be spending on loan features you never use. We can help you find a loan more suitable to your current financial needs.
• Consolidate your debt by rolling all your credit card expenses, personal loans and car finance into your home loan. You’ll save thousands of dollars because your home loan will almost certainly attract a far lower interest rate than your credit card debt.
Keep in mind that these strategies are designed to reduce your level of mortgage stress by minimising the amount of your monthly loan repayment.
But while helpful, they do very little to drive down your mortgage’s principal sum, which is the best strategy of all because it allows you to pay off your loan in full as soon as possible.