Balancing Home Loan Repayments and Cost of Living in Challenging times

Skyrocketing house prices nationwide, combined with a cash rate that has remained at a decade-long high since November, have contributed to widespread penny-pinching among mortgage-burdened Aussies.

If you’re a homeowner, you may feel like you’ve been left in the lurch – but you’re not alone! Many mortgage holders are struggling to meet mortgage repayments without having to sacrifice their financial health and basic needs. Balancing everyday expenses with a hefty mortgage is a real challenge for many Aussies.

So, what can you do?

The first step for anyone struggling with their mortgage repayments is to ensure you’re on a competitive rate. If your current lender can’t provide you with a more competitive deal, there may be another lender who can. Refinancing can be crucial to maintaining a healthy, adaptive mortgage.

Just like you can switch over to a more competitive rate for your home loan, you can do the same for your utilities. Talk with your existing electricity and gas provider to see if there are cheaper options available. If they can’t move you to a more competitive rate, shop around with other providers.

If you’re unable to make your regular repayments on your home loan, it may be worth exploring the option of switching to interest-only repayment, like 6% of mortgage holders in Australia. Interest-only payments are charged monthly by your lender, but they’re smaller than regular mortgage repayments, since you are only paying the interest. Your loan amount will remain the same and you’ll still keep the property, but eventually, you’ll need to pay off the original loan amount, often through higher repayments later on. This could end up hurting you more than helping you, so it’s always important to discuss this in-depth with your finance professionals before making this decision.

The option of interest-only repayments depends on your individual circumstances and may not be available to owner-occupied loans. It’s essential to consult with a mortgage broker to determine if this is an option suitable for you.

If you’ve had your loan for several years, the remaining term left on your loan may be shorter than the maximum term of 30 years, offered by most lenders. If you’re struggling to pay your home loan, refinancing to extend your home loan back to 30 years can reduce your monthly repayments and help manage your household budget. While this will increase the total interest paid over the life of the loan, unlike interest-only repayments, the principal balance will still decrease. Essentially, a longer repayment term means more interest over time; the longer it takes you to pay off your loan, the more interest you’ll accrue.

Additionally, local food markets, farmer markets, and produce suppliers such as fruit stores, bakers, and butchers have seen relatively stable pricing while supermarket costs have skyrocketed. Instead of going straight to your local supermarket, it may be worth going down to your community’s Sunday market.

It’s important to let your lender know before it if you are experiencing any financial hardship or struggle; brokers and lenders can help you navigate this stressful time, so don’t delay and reach out as quickly as you can – after all, we’re here to help!