Your home loan is most likely stretched over a period of 25-30 years, and interest rates will almost certainly fluctuate significantly over the life of your loan.
Just look at how things have changed in the last 10 years – the Reserve Bank’s cash rate has fluctuated between 2.00 per cent and 7.25 per cent.
And to add to it, at one point or another, your financial situation is likely to change which could put pressure on your household budget. So, what can you do to help overcome mortgage stress?
Talk to your bank
Don’t be afraid to talk to your lender or broker. Banks can help if a person is in genuine hardship. If you’re stressed financially, have an open and frank discussion with your bank – and the earlier you do it, the better. Your mortgage broker can help guide the conversation. Or even better, we may be able to find you a solution before hardship really sets in.
Look at different products
If you are trying to ease mortgage stress in the future, a long-term fixed rate may be worth considering. This option puts a ceiling on your repayments. You can lock it in for up to five years and it gives you the knowledge of what you have to pay each month, which can help you better plan your household budget. Beware of the interest free loan – it might seem like it could relieve mortgage stress, but at the end of the day it’s still a loan that has to be repaid.
Protect your debt
Don’t rule out loan protection plans. Have you thoroughly examined your options? There are basic insurances that can protect you – and your mortgage – in the event your life changes and you can’t meet your payments.
Again, speaking with your broker is the most important step – we can arm you with knowledge that enables you to make a more informed decision.