Interest rates may be low, but Australians weren’t entirely immune to the c’est la vie attitude about mortgages that got the rest of the developed world into trouble. Hence, the current high levels of mortgage stress around the country. There are a million ways of getting into mortgage stress; you sign up to a mortgage that’s beyond your means to repay, you become redundant, you haven’t budgeted for changes in the interest rate, you haven’t budgeted properly at all. Whatever the reason, Yahoo! Personal Finance has set out a five-step plan to getting out of mortgage stress, which has inspired this column.
Step 1: Don’t Panic
People tell you again and again, but it remains hard to believe; you feel instantly better once you start taking action. The most crippling of human feelings are fear and helplessness. As soon as you resolve to redress the scenario and take action, you’ll feel far more empowered and able to deal with the situation. Blame is easy, anger close at hand but- at this point in time- going over the details of how you got here isn’t doing anyone any favours. Accept it, and start thinking about your plan.
Step 2: Know Your Situation
As suggested in Yahoo! Personal Finance, this means a budget. Write out all your liabilities, then look at your income sources. How much space is left for saving? Can you allow some space in your budget for changes in the interest rate over the coming years? Have you extra debts (credit cards, personal loans) that need to be accounted for, along with mortgage repayments?
Step 3: Contact Your Lender
As soon as you know you might have trouble with repayments, get in touch with your lender. Yes, not the most pleasant of conversations, but one that needs to happen as quickly as possible. Yours is not a unique scenario, and lenders are far more likely to be interested in getting their money back at a slower rate than getting none at all. There are options- deferral of repayments, interest-only repayments for a certain period, an extension of the loan so repayments are smaller.
Action The Action Plan
Communication. Consistency. Hitting the goals you’ve set. This is the baseline of your action plan. However you’ve decided to deal with your mortgage stress, stick to the plan. It’ll help alleviate the stress you feel, along with the stress on your finances. Having a plan, and a consistent, routine approach to actioning that plan, is a fantastic tool to start achieving your financial goals and redressing your financial situation.
First of all, communicate with those around you. We all go through life as if we’re the only ones to have ever made a mistake. I guarantee, as soon as you mention it, you’ll be amazed the amount of people that can relate. And that’s an amazingly powerful tool in itself; having a support network that can help you through this tricky period. There are financial counsellors you can call in every state, if you need professional assistance and make sure to keep in touch with your lender. You might both have different motivations, but your agenda has the same goal in the end. They can only help if they know what’s going down.