There’s a few important things you need to know about Mortgage Stress in Sydney – and why it is increasing.
It starts off by being caused by people borrowing too much money to buy property and then not being able to repay the loan when their financial circumstances change.
Later they end up feeling anxious because they are overstretched on their mortgage.
Save yourself from Mortgage Stress and avoidable House Repossession by making provisions for mortgage repayments.
You must consider the size of deposits, outstanding debt, income from primary & secondary sources, and stability of income while calculating the affordability of mortgages. This calculation is of utmost importance even before you think about applying for Home Loan.
Lenders consider your net income and expenditures per month to evaluate your appetite for risks. You must also account for the impact of significant factors like fluctuating interest rates and economic phases.
Traditional lenders use the loan-to-income approach to calculate the money you can borrow primarily depending upon your pre-tax income.
For instance you might be able to borrow a mortgage of $450,000 if your average monthly income is $100,000.
Earlier the amount of mortgage didn’t exceed 4 to 5 times your actual income. Now when you apply for a mortgage, the lender would assess your ability to repay along with your total expenditure.
The following aspects will be considered by the lender while deriving the affordability quotient of your mortgages:
Your total income will constitute your basic income along with income from sources other than salary or primary sources.
Other income comprises of earnings from overtime, interest income, commission, bonuses etc. The lender may ask you to present pay slips, bank statements and tax payment receipts to arrive at a feasible amount of mortgage.
Your credit card or loan agreements, maintenance payments, utility bills, childcare bills, medical bills and lifestyle related bills are referred by the lender in order to arrive at the value of total expenditure.
Many times a credit report is used to depict the amount of expenses incurred. It is advised that you keep your lender informed about any missed credit payments. You may also be asked to submit of copy of bank statements to support your expenditure declaration.
The lender will assess the following important factors listed as under:
- Nature of your employment and probability of job loss, the same will be applicable to other earning members of your family
- Probable changes in lifestyle on account of future events like conceiving a baby or planning a sabbatical
- Work related illnesses
- Fluctuation in interest rates
It is important that you look at the bigger picture while planning Home Loan Debt or Personal Debt in order to avoid financial stress arising on account of poor planning.
It is advised that you should make provisions for mortgage repayments even before you apply for one.
You should be able enough to face future changes like interest rate fluctuations leading to extra payments along with possibilities of refinancing the mortgages.
If you are experiencing Mortgage Stress get in touch with experienced property solutions experts like Property Solutions for Australia for mortgage stress and home repossession help and to calculate the affordability of mortgages. Call us on (02) 8006 0420 for a “No-Obligation” consultation.
Alternatively you can CLICK HERE and get instant access to a FREE report on the “7 actions you can take immediately when you can’t pay your mortgage!”