What to do if you’re struggling to repay your home loan

It’s never easy to admit when you need help, but financial stress and budget strain happens to the best of us. And when external issues begin to impact your ability to pay your home loan, it may be time to ask for help.

There are a range of reasons homeowners may find themselves in need of assistance with their mortgage, and it is more common than you may think. This may include:

  1. Loss of income – From a job loss, a decrease in pay or decline in your business.
  2. Medical reasons – Illness or permanent disability.
  3. Natural disaster – Bushfire, floods, drought, cyclones and more.
  4. Personal reasons – Change in family structure, such as separation, divorce, loss and more.
  5. Financial strain – Unexpectedly-high expenses, such as utilities bills.

In the last 18 months, the abnormal circumstance that is  COVID-19 has put more people into this category than ever before. When you consider the impact it has had on small businesses and households, particularly in Sydney and Melbourne, it’s understandable if you’re suddenly struggling to meet your mortgage repayments.

In fact, recent figures from the Australian Banking Association (ABA) found that over 57,000 customers have now accessed hardship assistance during the latest lockdowns. A further 30,000 home and business loan payment deferrals were also recorded.

According to the ABA, home loan referrals remain the most common type of deferral provided to customers, accounting for 88 per cent of all deferrals. So, if you’re finding it harder to meet your mortgage repayments at the moment, you’re not alone.

Whether you’ve recently been made redundant, or you’re facing an eye-watering energy bill, there are options available to Reduce Home Loans customers if you’re struggling to repay your home loan.

 

Tips for when you can’t repay your mortgage

 

The last thing you or Reduce Home Loans wants is to see you default on your home loan and lose the property.

If you’ve found yourself in a tough position, there are a few practical steps you may want to consider to get your repayments back on track and avoid default.

 

1.    Speak to your Reduce Home Loans finance manager

 

Reduce Home Loans aims to help its customers throughout the life of your home loan, including your difficult seasons too. Your first step in this scenario should be to reach out to Reduce Home Loans as soon as possible.

If you find yourself unable to comfortably meet your mortgage repayments, please speak with your personal finance manager at Reduce Home Loans. Reduce Home Loans has processes in place to help you in the event you cannot easily meet your loan repayments. The extent of this support will depend on your specific situation.

With email, live chat, and a dedicated call centre team, we’re contactable 24/7, meaning Reduce Home Loan customers are not alone if adverse events occur.

 

2.    Reassess your budget

 

If meeting your ongoing expenses is becoming increasingly challenging each month, it may be time to reassess your budget. Get copies of your banking statements and go through the last few month’s worth with a fine-tooth comb.

Next, label your regular spending into categories, such as utilities, medical, entertainment, groceries etc. Reduce Home Loan’s Budget Calculator could be useful here in helping you keep track of your expenses and better view your financial situation overall.

Now you know where your money is going, it may be time to make some changes and tough decisions. Anything from cutting out your regular takeaway food ordering to paying down your overdue credit card that’s just accruing interest could help free up some funds.

The standard rule of thumb is that your mortgage payments should not exceed more than 30 per cent of your income. Anything higher than this is considered to be “mortgage stress”.

Some financial experts even recommend focusing on an adaptable monthly budget as opposed to trying to fit your finances into an annual budget. While the latter may be better for big savings goals, monthly budgets may help you be better prepared for unexpected costs, such as higher-than-expected utilities bills.

 

3.    Not a Reduce customer? Consider refinancing

 

Reduce Home Loans is passionate about supporting its customers, and if you’re not an existing customer, we want to help you too.

If you’re finding meeting your mortgage repayments challenging, you may want to consider refinancing to a lower rate, or lower fee option. This may be a worthwhile option for those who aren’t struggling to meet their repayments due to a loss of income, but because of their existing high home loan rates and fees.

Refinancing to a more competitive home loan is one way to potentially cut down your mortgage repayments, making them more affordable for your budget. For example, Reduce Home Loans currently offers a record-breaking variable home loan rate for refinancers with our Super Saver 60 Home Loan. Offering an interest rate of 1.77 per cent, this makes it one of the lowest variable rate options on the market for owner-occupiers paying principal and interest.

While there are some costs associated with refinancing, such as exit fees for fixed rate loans, or application fees with a new lender, switching home loans is generally considered to be a cost that “pays for itself” through rate or fee reductions.

You’ll also need to ensure your personal finances and credit score are up to scratch, as a new lender will assess your application just as your existing lender did. So, if you’ve recently seen your income reduce or you’ve just started a new role, it may not be the right financial decision for you. Always weigh up the pros and cons before making any financial decisions.

 

But if you’re finding it hard to meet your current home loan repayments due to high rates or fees, pick up the phone and speak to our Reduce Home Loans Mortgage Experts for more information today.

 

Any statement/s are general in nature and do not take into account your financial personal situation, objectives or needs. You should consider whether any statement/s is suitable for you and your personal circumstances. Before making any financial decision, consider your circumstances and the product disclosure statement.

(29)    For the Rate Cutter Variable where the borrower pays $1170 upfront fees then a corresponding loyalty discount of 0.10% p.a. off the Rate Cutter Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(27)    For the Investor Rate Slasher Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Slasher Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(26)    For the Low Rider Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(25)    For the Economizer Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Economizer Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(24)    For the Super Saver Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.10% p.a. off the Super Saver Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(23)    For the Super Saver Variable where the borrower pays an upfront fee of $1170 then a corresponding loyalty discount of 0.15% p.a. off the Super Saver Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(22)    For the Economizer Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.11% p.a. off the Economizer Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(21)    For the Investor Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(18)    For the Home Owners Dream 1 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(20)    For the Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(14)   For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(12)   For the Investor Rate Lovers Interest Only where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.07% p.a. off the Investor Rate Lovers Interest Only rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(11)   For the Wealth Maximizer 3 year fixed Principal & Interest where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(10)    For the Wealth Maximizer 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(9)    For the Home Owners Dream 3 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(8)    For the Home Owners Dream 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(7)    For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(6)    For the Investor Rate Buster Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Investor Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(5)    For the Rate Buster Variable where the borrower pays an upfront fee of $150 then a corresponding loyalty discount of 0.05% p.a. off the Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(4)For the Rate Slasher Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.08% p.a. off the Rate Slasher Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(3) For the Investor Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Lovers Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(2)For the Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Rate Lovers Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(1) For the Low Rider Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(28) For the Rate Crusher 1 Year Fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.05% p.a. off the Rate Crusher reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(19) For the 1 Year Fixed Wealth Maximizer where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the 1 Year Fixed Wealth Maximizer reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.