Avoiding Mortgage Stress

Simon and Terri-Lee

"Our Smartline Adviser was prepared to do the research and come up with a solution. Too many people try and cookie-cutter you or just give up." Simon and Terri-Lee

"When Adam’s parents suggested he contact Smartline, he was excited to hear he could secure a loan with a savings plan and some help from his parents." Adam

Adam
Adam and Natalie

"We had a broker who didn’t make us feel foolish for asking questions, even if it was for the third or fourth time."
Adam and Natalie

"Nothing was too much trouble – our broker met us after hours, and he always got back to us promptly with the answers to any questions we had." Angelo and Belinda

Angelo and Belinda
The Humphries

"We knew we had built considerable equity in our property but were not sure of exactly what to do with it and how best to use it."
The Humphries

"I’ve got a better interest rate, better flexibility, facilities and best of all less stress!" Irene

Irene
Simon

"I refinanced my previous property with my Smartline Mortgage Broker, and the service was so good we stayed with him this time around." Simon

"Building a house can be a very overwhelming & emotional process as there is a lot of money involved, but our broker took care of everything and was always available when I called." Fiona & Jamie

Fiona & Jamie
Helen and Michael

"Our Smartline Mortgage Broker has been fantastic. He showed us how refinancing our home could not only save us money, but also make it possible to buy an investment property." Helen & Michael

Avoiding Mortgage Stress

There's no denying that a mortgage is a big responsibility, but by building a financial buffer you should be able to stay on top.

When you are first doing your home loan sums, plan ahead. For example, think about what might happen if there were a rapid increase in interest rates, if you lost one income, if you had an unexpected child. Would you have the capacity in your income to cover the extra expense, or do you have a back-up plan?

Build a buffer to beat mortgage stress

One way to be ready for an unexpected financial emergency is to make sure that you have a buffer built into your loan. By paying off a little extra every month you build up a cushion to make life a little easier in hard times.

A honeymoon discount rate for the first year of your mortgage gives you a great opportunity to reduce your loan right from the start. Simply pay higher repayments than you need to and you will immediately start eating away at the principal.

If you borrow to your financial limit, then consider an interest-only loan with an option to pay extra. Pay in the extra whenever you can, and only pay the minimum when you have less cash available.

Keep to a budget

A budget can help you take control of your money and make sensible decisions on how you spend it. It gives you a financial roadmap to follow.

Start by recording every time that you spend money, from big expenses to small. Without this, you won’t get a realistic picture of where your money is going – and you might be surprised by how quickly small expenses add up.

Many of the bills and expenses you pay, such as fuel, food, insurance, rates, mortgage, rent, telephone and electricity are repetitive and predictable. A budget gives you a framework not only to plan ahead for these expenses, but also to plan your future with confidence.

Taking a critical look at what you spend will also help you to make cutbacks that will enable you to pay extra off your loan. The more you pay off now, the easier your mortgage will be to manage in the future and eventually this could save you thousands of dollars in interest every year.

Cut down on credit

Credit card interest rates are often very expensive – sometimes over 20 per cent per annum. The best way to use a credit card is to pay off the FULL BALANCE of your credit card each month, i.e. not just the minimum repayment amount. That way you benefit from the convenience without paying punishing interest rates.

‘Sometimes the best way to escape the debt trap is to avoid it altogether,’ says Smartline Adviser Tony Petrevski. ‘If you don’t think that you are disciplined enough to pay off the full balance each month then consider cutting up your cards and not using credit at all.’

Use pay rises wisely

‘Have you ever had the feeling a pay rise would make all the difference to you, only to wonder where the money has gone when you actually received it?’ asks Tony. ‘It’s too easy to fall into the trap of increasing spending when we have an increase in salary.’

Consider escaping this cycle the next time you get a pay rise by putting at least 50% of it towards increasing your loan repayments. That way you are building an asset that may help to make you money in the future.

Signs of mortgage stress

If you’re struggling to maintain regular expenses such as insurance and school fees, cutting down on things like pay TV and takeaways or using your credit cards for everyday expenses such as groceries, then you may be under mortgage stress.

‘Stop. Think,’ advises Tony. ‘Everybody has to save for major expenses like a new car or television, but if everyday expenses are getting too much, then it’s time to take your finances in hand. Talk to your mortgage broker – there are ways we can help.’

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