The mortgage cliff is a situation where homeowners’ monthly mortgage payments suddenly increase significantly when their fixed-rate loan term expires. This can happen when interest rates have risen since the loan was taken out. The sudden increase in payments can put a strain on homeowners’ budgets and lead to financial hardship.
If you’re facing the mortgage cliff, there are a few things you can do to get relief:
- Talk to your lender. Your lender may be willing to work with you to lower your monthly payments. They may be able to offer you a lower interest rate, a longer loan term, or a payment holiday. If you are in real trouble do to an event like unemployment or sickness, you can apply for “Hardship” where you can stop or reduce payments for a period of time without it neccessarily effecting you credit report.
- Refinance your loan. If your lender is not willing to work with you, you may be able to refinance your loan to a lower interest rate. This can save you money on your monthly payments, but it may also involve closing costs.
- Make extra payments on your loan. If you can afford to, make extra payments on your loan each month. This will help you pay down your debt faster and reduce your monthly payments.
- Consider selling your home. If you can’t afford the higher payments, you may need to sell your home. This is a drastic step, but it may be the only way to avoid financial hardship.
If you’re facing the mortgage cliff, don’t panic. There are options available to help you get relief. Talk to your lender and explore all of your options.
Here are some additional tips for getting through the mortgage cliff:
- Create a budget. This will help you track your income and expenses so you can see where your money is going.
- Cut back on expenses. Look for ways to reduce your spending, such as eating out less or canceling unused subscriptions.
- Get a second job. If you can, get a part-time job to bring in more income.
- Seek financial help. There are government programs and non-profit organizations that can help homeowners who are struggling to make their mortgage payments.
The mortgage cliff can be a stressful situation, but it’s important to remember that you’re not alone. There are people who can help you get through it.
For a free assessment with your Origin Finance broker call 1300 30 67 67 or fill in the enquiry form on this page.