Mortgage stress is a real issue facing home buyers and owners, with interest rates and house prices rising. If more than 35% of your post-tax income goes towards home loan repayments it’s more likely you will be under financial pressure.
Signs of mortgage stress include unauthorised overdraft fees, dishonoured payments, making interest-only repayments on your loan, struggling to cover power and phone bills, or a large credit card bill you can only afford to pay the minimum amount on.
Buyers can be tempted to spend up to their lending limit to get the perfect house, but always think ahead before signing on the bottom line. Purchase a house you can comfortably afford, as there are factors outside of your control - including interest rates and the cost of living - that need to be included in your financial planning. Also plan for starting a family or having additional kids and how that affects your income.
We recommend that people ask themselves three important questions
- Can you afford to pay more on your mortgage in 5, 10, or 15 years if rates rise?
- Do you want to start, or grow your family - can you afford to live on one income?
Do you have the necessary insurance in place if you or your partner can’t work, to protect your home and family? This can include Life, Mortgage and Income Protection Insurance
Safeguarding your financial security means being realistic. Make sure you have room to move if interest rates rise. Keep your equity as equity - don’t be tempted to spend up, and live within your means.
There are enough things to worry about in life, and your mortgage needn't be one of them. Contact us for advice on how to improve your financial security, and take the pressure off.