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Stressed about your mortgage? Here’s what you can do about it

Really bad news about my home finances
If you're experiencing mortgage stress, here's what you can do. (Source: Getty)

Living in Australia doesn’t come cheap.

Although the RBA rate cuts have seen interest rates on home loans come down, more home owners are feeling the pinch than ever, with over one million Australians estimated to be in mortgage stress.

But some Aussies are more stressed than ever, with some suburbs in greater mortgage stress than others.

According to investment property firm DG Institute founder Dominique Grubisa, these are the 20 suburbs where mortgage stress is worst:

  • NSW: Chipping Norton, Leumeah, Mount Annan, Bidwill and Dean Park

  • VIC: Narre Warren South, Berwick, Pakenham, Ballarat East, Sydenham, Frankston, Derrimut and Roxburgh Park

  • QLD: Harristown, Camp Hill and Geebung

  • WA: Tapping, Merriwa, Innaloo and Success

  • SA: Paralowie

“Mortgage stress is a nationwide crisis and right now it’s the highest it has been in many years,” Grubisa said.

Property investors can make an investment and also help those in distress by purchasing homes before they are repossessed by banks, she added, creating a win-win situation for both parties.

“Australians need to be conscious of their spending and how they can manage their finance to be sustainable for the long term.”

What can we do about mortgage stress?

For those experiencing mortgage stress, Grubisa offers five tips of advice:

1. Explore all your options and refinance

Before refinancing, speak to a credit provider, switch your home loans, get a credit card balance transfer, or even sell your house, she said.

“There are lots of alternative products to choose from if refinancing is considered your best solution. First, analyse all the terms and conditions and fees associated with your current mortgage. Then calculate how much is needed to borrow for the new loan.”

Shop around for a better home loan to make sure you’re getting the best deal, she added. “It is better to get an idea upfront for any fees associated with the type of loan you would like.”

2. Analyse your spending and prioritise

Take a look at your monthly spending, said Grubisa.

“Are there expenses that you can eliminate such as eating out, cancelling TV or magazine subscriptions or memberships you don’t utilise? Prioritise where your money should go.”

Your household budget should be manageable and realistic, the property investment firm founder said.

3. Avoid using high rate credit cards

“Find alternative credit cards which benefit your income, spending usage and will assist you in the long term,” said Grubisa.

Also, it will help to repay your balance before the statement due date so you don’t incur any interest charges. “Look into credit cards which offer an ongoing feature of interest- free days.”

4. Negotiate

If you don’t ask, you won’t receive. It won’t hurt to try negotiating on your debt.

“We’ve helped clients pay out at much lower figures, for example a lender recently accepted $11,000 for a $75,000 debt,” she said.

5. Vary the loan

If you’ve gotten yourself in a tight spot, speak to your lender to vary the loan for hardship. “In other words, renegotiate the terms and conditions,” said Grubisa.

In this instance, you can invoke the Banking Code of Conduct, which 25 financial institutions operating in Australia have subscribed to. The Code is a set of enforceable standards designed to protect customers, small businesses.

“You can effectively have zero payments – a total freeze for six to twelve months.”

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