What is mortgage stress? Understanding, identifying, and overcoming it
Everyone wants to protect their home, so what is mortgage stress in your home loan and how do you overcome it? Mortgage stress occurs when a household spends a significant portion of its income, often defined as over 30% of pre-tax earnings, on mortgage repayments, leaving little room for other essential expenses. This financial strain is exacerbated by rising living costs, interest rate hikes, or unexpected life events such as job loss or medical emergencies.
In Australia, mortgage stress is a growing concern, with 26.8% and growing of mortgage holders reportedly at risk. But how can you determine if you’re affected? That’s where tools like MyBudget’s Mortgage Stress Calculator come in handy.
Signs of mortgage stress
Difficulty meeting repayments
Struggling to pay on time or dipping into savings.
Cutting back on essentials
Reducing spending on groceries, utilities, or healthcare to prioritise mortgage payments.
Increased debt dependence
Relying on credit cards or personal loans to cover expenses.
Emotional and physical stress
Anxiety, sleeplessness, and strained relationships.
What causes mortgage stress?
Mortgage stress can arise from various factors:
Interest rate hikes
Higher rates lead to larger monthly repayments.
Loss of income
Job loss or reduced hours can significantly impact financial stability.
Unexpected expenses
Medical emergencies or urgent home repairs can disrupt budgets.
Over borrowing
Taking on a mortgage that stretches finances too thin.
How to determine if you’re in mortgage stress
The free MyBudget Mortgage Stress Calculator simplifies this process:
- Enter your household income and monthly mortgage repayments
- Select your repayment frequency
- View your result:
- Stress-Free Zone: Repayments < 20% of pre-tax income
- Danger Zone: Repayments between 20%-30%
- Stress Zone: Repayments > 30%.
This visual tool helps you understand where you stand and offers actionable insights.
How personal budgeting can help
At MyBudget, we specialise in creating tailored budgets to help you regain financial control. Here’s how we support you:
- Plan ahead: your income and expenses are mapped out 12 months in advance.
- Automate finances: we manage your bills, savings, and repayments.
- Build emergency savings: every budget includes a safety net for unexpected expenses.
- Tailor to your lifestyle: enjoy date nights, holidays, or savings for a house deposit, all part of your personalised plan.
- Dedicated support: “I can call MyBudget feeling completely stressed out about an unexpected bill or circumstance, and I always finish off the call feeling relieved and confident that my money is in good hands.” – Sarah, current MyBudget client
Practical steps to manage mortgage stress
- Review your budget: use MyBudget’s tools and expertise to identify savings opportunities
- Talk to your lender: they may offer options like temporary repayment reductions or refinancing
- Explore additional income streams: consider part-time work or renting out a spare room
- Seek professional help: MyBudget provides personalised financial guidance tailored to your situation.
Why choose MyBudget?
Financial stability isn’t just about managing numbers, it’s about peace of mind. With MyBudget’s Mortgage Stress Calculator and expert support, you can:
- Reduce financial strain
- Gain clarity on your finances
- Achieve long-term financial goals.
Take action today
Don’t let mortgage stress take over your life. Use the Mortgage Stress Calculator to assess your situation, and let MyBudget help you build a brighter financial future.
Ready to transform your finances? Start your personal budgeting journey with MyBudget today.