Home loan stress refers to a situation where in a homeowner spends more than 30% of his gross pre-tax income in repaying the home loan repayments. It can also be described as “home buyer’s stress”.
If not kept under control it can quickly lead to home repossession.
When you have home loan debts and your cost of living is increasing by the day, you are very likely to face severe debt anxiety. The situation is in line with the popular economic definition of demand that states – human ends are unlimited but means to satisfy them are limited. We often tend to buy home or property without accounting for financial contingencies that may arise in the near future. A recent study depicts that close to 40 per cent of Australians experience financial stress arising due to mortgage repayments.
You may be optimistic about your decision of financing your home loan in a particular way, say you wouldn’t mind spending 30% of your gross income in repaying your home loan. Home loans are sensitive to several factors that lead to a sudden surge in the level of stress. Let’s have a look at factors that lead to mounting mortgage stress.
Rise in interest rates:
There are different kinds of home loan packages available today to best suit your financial needs. The most prominent amongst them include simple mortgage as well as mortgage by Conditional Sale, mortgage by deposit of title of deeds, anomalous mortgage, mortgage with fixed or floating interest rate etc. The annual national budget has huge implications on our mortgages. A rise in interest rates might put us into trouble; similarly a decline in the rate of interest can leave us with surplus funds. Former situation can lead to an increase in Home Loan Stress.
An economy undergoes various stages for instance slump, recession, recovery and boom. These economic contractions and expansions have an impact on our mortgages too. You may have opted for a mortgage financing considering that the economy is about to enter boom phase. You would find yourself in a financial disaster if the economy shows signs of a slump or recession. Leading financial analysts around the have evidently failed in accurately timing the market trends before the recent global recession.
Unforeseen medical ailments:
Most of us do not account for medical ailments arising during the period of mortgage repayment. Medical conditions create a lot of financial and emotional stress. Medical costs can not only hamper the ability to make timely repayments but also create a deficiency in the fund pool reserved for mortgage repayments. It is advised that we make provisions for medical contingencies arising in future before the situation goes out of control.
Sluggish trends in Real Estate industry:
Avoid falling under the trap of a sluggish real estate market by conservatively valuing your assets. No matter how hard the times are, you should make an effort to save your primary property from liquidation. You should understand the market trends by yourself or seek legal assistance from experts like Property Solutions for Australia.
A sudden job loss can turn the tables against you when you have fixed Home Loan Debt or Personal Debt repayments scheduled by the lending institutions. It is advised that you have a secure employment throughout the tenure of mortgage repayment schedule.
If you know someone that is about to lose their home through Repossession – please get them to call Property Solutions For Australia on 02 8006 0420