Tips for Stressed Home-Owners

Media release: Monday 6 August 2007

Tips for Stressed Home-Owners from Mike Pero Mortgages

Mike Pero Mortgages Chief Executive Jeff Staniland says people who are facing ‘mortgage stress’ should seek advice as soon as possible.

“Now, more than ever, is the time for home-owners facing financial stress to get trusted and unbiased advice, so they can consider their options and plan ahead,” says Jeff Staniland.

“Our recommendation is people should talk to their mortgage broker, who will look at their complete financial situation and help them with their options.

“In some cases that may just be some free budgetary advice, while for others it may be to restructure their mortgage or to consolidate other debt”

‘Mortgage stress’ has been defined as households that spend more than 40c in each after-tax dollar on mortgage payments. The number of people facing ‘mortgage stress’ has reportedly jumped from under 4 percent in 2004 to more than 11 percent in June 2007.

“Home-owners coming off relatively low fixed mortgages and moving onto higher rates as well as those on floating rates are facing significant increases in their mortgage payments. It’s not surprising, therefore, that there has been a rise in the number of people in this situation.”

“The generally higher level of mortgage borrowing required now, compared with a few years ago, also means more home-owners will be likely to suffer financial stress at some stage.”

“Home-owners do, however, have options. New Zealand house prices have remained strong which means that in most cases people can reorganise their mortgage and other debt commitments to reduce their financial stress.”

In addition to finding the best overall package – taking into account the headline rate, fees and conditions – a Mike Pero Mortgage broker may advise any or a mixture of the following in order to reduce ‘mortgage stress’:

* Mortgage payments weekly or fortnightly rather than monthly (means in effect an extra month’s payment per year)
* Lengthen the term of the mortgage to reduce monthly payments: some lenders now offer up to 30 years
* Move to a capped rate – which can only go up to a certain level
* Have a combination of fixed and floating rates to provide flexibility and to take advantage of lower rates when these happen sometime in the future
* Have your mortgage broken into two or more fixed components which roll-over at different dates, reducing the impact of interest rate rises
* Have a ‘revolving credit’ mortgage and deposit your salary and wages into this (reduces overall interest cost).

Mike Pero Mortgages also has a number of general tips for people in financial stress:

* Review your budget (and write it down!)
* If you are still worried, seek unbiased advice from someone you trust (such as a mortgage broker)
* Talk also to friends and family – they may be able to help with advice or even financially, plus it will help if they know your situation
* Act now (don’t sit back and wait for problems to get worse)
* But also take the time to consider your options (this is much better than having to make hasty decisions under pressure)
* Set goals – short-term, medium-term, long-term (if possible)
* Do not commit to other debts until you are confident you can meet your mortgage payments and other home-related outgoings.

ENDS

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