HOW TO ESCAPE MORTGAGE STRESS
AND WHERE TO GET HELP

Rising costs of living and high levels of consumer indebtedness is causing more borrowers to experience difficulty in meeting their mortgage commitments.

(1) Take control of your financial commitments

The most effective strategy for better personal financial management is to set a budget. Don’t discount how effective a monthly budget can be in giving you a financial framework to better manage your finances.

Budgets should not be considered a restraint, but rather a proactive approach to how you spend cash and factor in commitments. If you set an unrealistic budget it’s going to fail; so be practical and allow for some flexibility.

(2) Set financial goals

Goal setting is central to maintaining motivation. The principal reason most people stray from a budget is because they lose sight of where they are going and what they have achieved.

By applying some simple goals to your budget process, such as reducing the amount outstanding on a credit card or reducing personal loans, you can easily see the results, and are motivated to continue or even find new ways to improve your budget.

(3) If your are in trouble – ask for help

If you do not think you can keep meeting your mortgage repayments, contact your lender immediately. Borrowers don’t often realise that there are a number of ways a lender can assist borrowers experiencing hardship if they are given the opportunity early.

“We see many instances where borrowers would not be in the situation they are in had they contacted their lender earlier,” Mr Hall said.

Options may include a repayment break for a short period of time to allow you to get back on your feet, switching to an interest only option, or extending the loan loan term for a short period to reduce repayments. These are just some of the options a lender may explore. All are designed to keep you in your home and allow enough time to recover.

Often the lender and lenders mortgage insurance provider have programs in place designed to assist borrowers experiencing hardship. Some options the programs can offer include:
- capitalise arrears
- postpone payments for an agreed time
- agree to part payments if the borrower/s have some income
- convert to interest only for an agreed period
- extend the loan term to reduce repayments

(4) Check for eligibility for mortgage assitance programs

There are a number of State Government mortgage assistance schemes available. The schemes will vary depending on each state in Australia but each scheme is designed to provide support, for borrowers experiencing difficulty meeting their mortgage repayments. Click here for details.

(5) Explore the option to access superannuation

Borrowers in a stressed situation may be able to apply to the Australian Prudential Regulatory Authority (APRA) to access their superannuation to meet repayment arrears. When considering this option it is important to understand all implications and to seek advice in determining if this is the right option for the circumstances.

(6) Other sources of information

Australian Government - Mortgage Stress Handbook
www.legalaid.nsw.gov.au/mortgagestresshandbook

Australian Government - Understanding Money website
http://www.understandingmoney.gov.au/Content/