4 tips for avoiding mortgage stress

For the 37 per cent of Australians who reported having a mortgage in last year's census, there are few thoughts worse than struggling to keep their biggest asset: their home.

However, mortgage stress – where more than 30 per cent of your income goes toward home loan repayments – has become increasingly common Down Under. Fortunately there are ways to avoid such financial strain.

What is the outlook on mortgage stress in Melbourne?

The median monthly repayment in Melbourne is $1,800, according to the Australian Bureau of Statistics (ABS). A homeowner then, would need to earn $5,400 a month to avoid mortgage stress.

This isn't the case, however – the ABS also reports that the average weekly household income is $1,148, or $4,592 per month.

Many Melbourne homeowners do struggle with mortgage stress, although there's no saying that you have to! Mortgage stress can be avoided. Here's how:

Tip 1 – Expect the unexpected when considering properties

Smart house hunters have always crunched the numbers and figured out their ideal home price. At Direct Mortgages, we often find that this figure doesn't necessarily consider several factors that could affect affordability, including:

  • A hike in interest rates
  • Losing your job
  • Experiencing health problems
  • Having a child
  • Any other major expenditure

To this end, an experienced mortgage broker can help you think of every detail and evaluate which properties are within reach.

Consider every detail when planning your home loan repayment budget. Consider every detail when planning your home loan repayment budget.

Tip 2 – Live within your means and avoid unnecessary spending

This advice might seem the most straightforward, but following it can be difficult. There will always be the temptation to dine out, take a holiday or splurge on that special something but as a homeowner, you need to limit spending. Even little purchases add up and can leave you in a tough spot.

Tip 3 – Start off your mortgage on the right foot

One of the best ways to avoid major mortgage stress later on is to start out by always paying on time and never missing payments. If you do run into trouble later on, banks and lenders will be more flexible if you've been reliable.

Tip 4 – Work with a trusted mortgage broker at a smaller firm

Simply put, the big banks don't care about your mortgage stress. That means they won't be forgiving if you do struggle to pay and they also won't hold back from giving you a loan you can't afford in the first place.

When you let the team at Direct Mortgages negotiate for you, on the other hand, you'll have an advocate in your corner from the start. Our aim is always to find the most suitable finance option for our customers, and we'll also be there to leverage for you if you need assistance down the line.

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