The Ultimate Guide to Stress Testing Your Mortgage – 360 Financial Strategists

Feeling worried about paying your mortgage or saving up to buy a home? With living costs and mortgage rates going up, it’s natural to feel stressed. But there’s a way to check how you’re doing – it’s called a mortgage stress test or stress test mortgage.

When lenders decide how much to lend you, they already assume that interest rates might go up. They do this to make sure you can still pay your mortgage if rates increase.

So, if your income and spending haven’t changed much recently, you might already have a safety net. Plus, if you’ve been paying extra on your mortgage or have savings in an offset account, you can use that money to lower your payments.

Check Your Budget Regularly

Our incomes and expenses can change a lot over time. Whether you got your mortgage years ago or are planning to buy a home soon, it’s smart to review your budget every now and then, especially when big things happen in your life.

This means looking at your home loan interest rate and how you’re paying it back, and setting clear goals for your property plans. This helps you see if you’re still on the best loan for you or if you’re on track to buy where you want.

A common way to tell if you’re having trouble with your mortgage is if you spend 30% or more of your income before tax on paying it back. But every family is different, so it’s important to do your own math and figure out what mortgage stress means for you, and how changes in mortgage rates might affect this.

One family might be okay with rates at 6%, while another might find it too much. Knowing your numbers helps you know when you might need help or need to make changes in how you live if rates go up.

Preparing for Higher Interest Rates

Before you feel the pinch, you might think about cutting back on things you don’t really need. Canceling streaming subscriptions, finding cheaper utility and phone plans, and paying off credit card debt can all help. It’s a good way to feel more in charge of your finances.

Also, take a look at your mortgage and see if it’s still the best one for you. If you have a flexible interest rate, you might want to think about switching to a fixed rate. That way, you’ll know exactly how much you need to pay each month. You could also have a mix of both fixed and flexible rates. We can help you figure out which option is best for you.

Another thing to think about is making more money. You could ask for a raise at work, look for a better job, or start that side business you’ve been thinking about. Even a small increase in income can help you avoid cutting back on things you enjoy or dipping into your savings or extra mortgage payments.

Understanding How Interest Rates Affect Your Borrowing

If you’re saving up to buy your first home or thinking about investing in property, higher interest rates could mean you can borrow less money. Most lenders are still sticking to the amounts they agreed to lend you before, but it’s a good idea to check with us to see how this affects you. It’s important to know your borrowing limit and stick to it when you’re house hunting.

What to Do if You’re Worried About Paying Your Mortgage

The first step is to get in touch with us. We can talk to your lender and give you advice on what to do next. You can also get free financial counseling from the government’s National Debt Helpline by calling 1800 007 007.

Are you worried about your mortgage? A financial advisor can guide you in making the right financial decisions.

To find out if our strategies are right for you, feel free to contact 360 Financial Strategists online or on 03 9427 0855.