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Mortgage stress

Mortgage stress is the technical term for those who spend more than 30% of their income on home loan repayments. Find out if you're technically under mortgage stress and what you can do about it.

Richard Whitten's headshot
Sarah Megginson's headshot

By

Richard Whitten

&

Sarah Megginson

Edited by

Jason Loewenthal

Updated

Mortgage stress calculator

Mortgage stress calculator
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Enter your current mortgage details
What is your household income annually (pre-tax)?
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How much is left on your loan?
$
Years left to pay off?
years
Your interest rate p.a.?
%
Repayment type
Postcode
Your age
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Mortgage stress results
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30%
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Hardship
Your max interest rate before stress =
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5 Steps to mortgage empowerment:
Step 1 - Refinance to a cheaper home loan
Step 2 - Get expert tips to save money on bills and reduce your everyday expenses.
Step 3 - Get your budget in tip top shape and consolidate debts.
Step 4 - Ask your bank about its hardship policies or use a broker to find a debt solution.
Step 5 - Call the National Debt Helpline - 1800 007 007.
The mortgage stress calculator is not a complete assessment of your financial position. It is a general guide only. There are many additional factors unique to each individual mortgage that borrowers should take into account. Results are only as accurate as the information entered by the user. We recommend speaking to your financial adviser, mortgage broker or lender when considering your financial position and mortgage decisions.
You're in mortgage stress, but you don't have to figure your way out of this alone. If you're struggling to make ends meet due to mortgage stress, there are steps you can take to get into a better position. We have some guides for you below to help you compare your current costs to reduce your expenses, and also work with your bank to manage your situation. If you're struggling to stay on top of your financial commitments, you could reach out to a mortgage broker for personal advice (they're free!).
You're not in mortgage stress – yet – but you're at risk of falling behind if you're not careful. Definitely start budgeting and look for ways to pay less on your household bills by comparing your everyday expenses to find cheaper deals. Comparing your home loan is a good place to start, and we have other guides that can help you below.
You're doing okay; there's no need to panic. But it's a good time to start thinking about your budget and making sure you're not caught off guard by a sudden unexpected expense. Get back in the green and start paying less for your loan by refinancing to a cheaper rate.
Congratulations! You're doing well. Make sure you check back as your situation changes. Remember, it's always a good time to compare your rate with other loans on the market so you're never paying more than you need to, and it never hurts to pay less for everyday bills. Get the Finder app to start saving today.
Like many Australians, you're doing it tough. You do have tools available to you to turn it around, as some banks have hardship policies that can pause or lower your repayments. If that doesn't help, you may need to consider selling or moving, but before you make any drastic decisions, contact the National Debt Helpline for support.

What is mortgage stress?

Mortgage stress is defined as when a homeowner is using more than 30% of their income to cover mortgage repayments.

If you're feeling stressed, you're not alone: according to Finder's Consumer Sentiment Tracker (CST) 36% of Australians struggled to pay their home loan in May, with women and millennial homeowners hardest hit.

What causes mortgage stress?

Mortgage stress is a big issue in Australia right now, for a few reasons:

This all means that the average Australian's home loan costs are soaring. Prices for food, energy and fuel are also rising. This is pushing more people into mortgage stress.

Not all stress is equal

You may be spending only 20% of your income on your mortgage, which is technically below the definition of mortgage stress, but your other expenses may mean you're still in financial stress. For instance, a single parent earning $60,000 paying 25% of their income on their mortgage along with groceries for 3 children, plus all the additional living costs, will be more stressed than a couple with a household income of $140,000 paying 35% of their income on their home loan.

How can I manage mortgage stress?

There's nothing quite like the stress of struggling financially – it creates a pressure that can impact all areas of your life. If you're struggling to make ends meet and you're experiencing mortgage stress, there are steps you can take to get into a better position.

1. Take stock of your situation

  • Take a thorough look at your monthly spending and budget. Are there any obvious expenses you can cut out, like Uber Eats, eating out, online shopping, smoking, gambling, streaming subscriptions or a gym membership? We're not suggesting you cut out all of the fun in your life, but if you can find ways to drop a few non-essential spends, you can free up some money to go towards other bills and your mortgage.
  • Next, look for ways to pay less for what you already use. For instance, most of us have a mobile phone. Can you shop around for a cheaper deal? Our utilities expert writer Dylan Crismale explains how he saved $800 a year by shopping around for a better mobile phone deal. If you can compare and pay less for your internet and energy as well, those extra savings can go towards your mortgage repayments.
  • Save on groceries by shopping at Aldi, or signing up for a Woolworths Everyday Extras subscription. For an investment of $7 a month, you get triple points (to earn $10 discounts faster) and you get 10% off one grocery shop per month, up to $500 ($50 discount).

2. Refresh your home loan

  • Once you've taken the above steps, take a close look at your home loan to see what your options are to reduce your outgoings.
  • One option is to ask your bank to move your mortgage to interest-only repayments. This will lower your repayments significantly in the short term, as you're not making any payments towards the principal, you're just paying the interest. Interest-only loans cost you more in the long run because you end up paying more interest, but switching to interest only for the short term (12–24 months) could give you some breathing space.
  • Alternatively, refinance your mortgage. If you've just been managing to make repayments (and those repayments are principal and interest repayments), you may be able to refinance your mortgage to one with a lower interest rate. This could save you a couple of hundred dollars a month or more, and you might even be eligible for cashback worth several thousand dollars.

3. Consider ways to boost your income

  • Now that we've addressed ways to lower your expenses, can you find other sources of income? Could you get weekend work through Airtasker or Uber? Perhaps you could rent or use some of the space in your property in a variety of ways. You could also ask for a raise at work, or look for another job with a higher salary.
  • Can you sell anything? Downgrading your car or selling valuable items you might not need can help with a short-term cash injection.

4. Ask for help

  • Mortgage stress can impact more than your finances – it can also take its toll on your relationships and your mental and physical health. Don't try to find solutions all on your own, when there is support available.
  • Your lender might be able to help you if you're struggling to make repayments. It is in your lender's best interest to help you, as it wants to keep you as a long-term customer paying it interest. It may be able to assist with:
  • Hardship assistance schemes. Most lenders have hardship assistance schemes and can offer advice to help you get your finances under control.
  • Repayment holidays. Some lenders will let you pause your repayments for a short "holiday" to help you get back on your feet financially.

Other options for counselling and support

How can I avoid mortgage stress before it happens?

Maybe you're not in mortgage stress yet, but if you're starting to feel the weight of your mortgage repayments (or you're looking to buy a home and are worried about mortgage stress), there are steps you can take ahead of time.

For current homeowners, follow the steps mentioned above: look at your spending, cut costs, set a budget and consider refinancing if you can get a lower rate. Try to make extra repayments now (if you are able to) to build up a savings buffer.

For hopeful homebuyers, the following steps can be taken in advance to avoid mortgage stress:

  • Work out how much you can realistically afford to make in mortgage repayments. Look at your current expenses and then add mortgage repayments on top. If you're currently paying rent, be sure to work out how much more expensive a mortgage would be. Use our borrowing power calculator to help you plan carefully.
  • Buy a property you can afford. Once you know what you can afford, stick to it – don't go over that budget. If you can't get what you want then consider a cheaper suburb, a humbler property type or even consider buying in a cheaper city.
  • Start an emergency fund that can cover a few months of expenses if you find yourself unemployed.
  • Consider income protection insurance. This form of insurance provides a temporary income when you're unable to work due to illness or injury.

More helpful guides on Finder

Jason Loewenthal's headshot
To make sure you get accurate and helpful information, this guide has been edited by Jason Loewenthal as part of our fact-checking process.
Richard Whitten's headshot
Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise
Richard has written 530 Finder guides across topics including:
  • Home loans
  • Property
  • Personal finance
  • Money-saving tips
Sarah Megginson's headshot
Co-written by

Head of editorial

As an authority on all things personal finance, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a regular media commentator, appearing weekly on TV (Sunrise, Channel 7 news, Nine news), radio (KIIS FM, Triple M, 3AW, 2GB, 6PR) and in digital and print media. See full bio

Sarah's expertise
Sarah has written 186 Finder guides across topics including:
  • Home loans
  • Personal finance
  • Budgeting and money-saving tips
  • Managing the cost of living
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