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While Australia’s economy is much stronger than others around the world, major banks are reporting an increase in customers experiencing Mortgage Stress. Mortgage Stress is typically defined as customers who are more than 30 days overdue on their repayments. Any mortgage holder can experience Mortgage Stress, whether as a result of natural disaster, accident or injury, loss of job or just by falling on hard times. The most important thing to do if you do find yourself in Mortgage Stress is to remain calm and to make a plan. Outlined below are tips that are useful if you already are in Mortgage Stress or if you are simply finding it hard to make ends meet.
Talk to your Lender
This is the number one most important thing to do if you are behind or consistently late with your mortgage repayments is to talk to your Lender. As with most situations in life, nothing fuels unease more than lack of information. Lenders have special teams to help customers who are experiencing hardship, whether through offering repayment holidays or other simple strategies. The solution may be as simple as to move your repayment date to put it in line with your pay day. Remember your Lender cannot help you unless you tell them what the problem is. It is always in their best interest to help you get through your crisis rather than to foreclose.
Sell the house
This is, for most people, probably the most unpalatable option. Selling the house, especially if it is your home, is a decision usually tinged with emotion. If you have no other option or can see no end to your current financial situation, then selling the house may be your best decision. Even when sales conditions are not good, if you can make enough money to clear your debt, then you are probably doing the right thing.
Rent the house out
Before selling the house becomes your only option, consider moving out and renting the house out. Rent today is still generally cheaper than mortgage repayments. By having rent incoming for your house this should contribute significantly to your mortgage repayments and by renting elsewhere you should wind up with more money in your pocket at the end of the month. An even better situation would be to move in with relatives and rent your house out. While moving out of the house can still be an unpalatable thought for many, you still retain the asset and have the option of moving back into the home in the future.
Change to Interest Only repayments
Usually if it is your home, the mortgage will be paid in Principle and Interest repayments. If money is a little tight a good option is to approach your Lender to switch you to Interest Only repayments. These repayments will be cheaper however you will not be reducing the debt, merely treading water. For a lot of people a few years on Interest Only is enough to get them through a rough patch. With many loans as your situation improves you may be able to make voluntary Principle repayments as well before committing to returning to full Principle and Interest repayments.
With more Australians experiencing Mortgage Stress it is important to understand your options and to make a plan for the future. Communicating with your bank or mortgage loan company is key to staying or track, and keeping your credit rating sound.
