Published on 20 April 2016

Are you experiencing mortgage stress?

Stress is defined as a state of mental or emotional strain or tension resulting from adverse or demanding circumstances.

Mortgage stress is defined as a state of mental or emotional strain or tension resulting from the onus of paying a mortgage, or instalments, that are higher than 30% of the total family income.

You can do the math and see if your mortgage consumes more than or let’s say one-third of your total family income. However, there are exemptions. High net worth individuals who aren’t really under any financial stress and whose two-third incomes would be a fortune don’t really fall into this classification. For others, the average families with ordinary homes, mortgage stress is a reality.

How do you know that you are experiencing mortgage stress?

The math alone would not be sufficient. It is very possible that despite paying more than 30% of your income towards your mortgage, you would be doing fine. It is also possible that paying 25% of your income towards your mortgage can get you severely stressed. What it boils down to eventually are the symptoms. What stresses you may not stress someone else.

Let us consider some realities.

Are you consistently thinking of the mortgage you pay? Are you perennially under duress that you have to pay the instalment? Are you compromising on a whole lot of things, perhaps including some humble purchases to continue paying your mortgage? If any of these realities are a part of your life, then you are experiencing mortgage stress.

The reason why 20% to 30% of income is considered the threshold while approving mortgages is the belief of experts over the decades that such an amount can be conveniently put aside and paid by an individual or family. What is not accounted for in such calculations are fluctuations, personal obligations or liabilities that emerge after evaluation the mortgage application when there may not be any debts or astounding financial dependence and many such possible circumstances that can squeeze every cent of the remaining income of an individual or family.

From medical problems to a growing family, professional troubles to untoward developments at home, there can be numerous factors contributing to mortgage stress. Homeowners should consider strategizing their finances to avert mortgage stress. Homebuyers should do the math properly before signing up for a mortgage which can lead to unnecessary and undesirable stress.

The mortgage industry is unlikely to work in favour of individual homebuyers or families that own homes. It is eventually upon every individual to make the right choices.


As always, we recommend speaking with your YFG lending specialist when determining the right amount for you to be spending on your mortgage – They are the experts after all!


Other Blogs

8 November 2016
What is an interest-only loan
Every loan has a declared rate of interest. The interest could be a fixed rate or floating. It could be a combination as well, fixed for a few years and then adjustable as per the prevailing lending rates in the market. All standard loans are re-paid over a period and every instalment has a bit […]
Read More
1 November 2016
What is bad debt and what is good debt?
Debt is unavoidable. All of us have debts. For some people, the debts are simple obligations like utility bills. For many, it would be a credit card bill. From mortgage to paying back the student loan, people have myriad types of debts. It is almost impossible to avoid debts. Even the billionaires of the world […]
Read More
25 October 2016
What does it mean to have a guarantor on your mortgage?
Buying a home is difficult. Buying a home when someone is very young is all-the-more challenging. Young professionals may be able to pay the instalments of the mortgage but saving enough to make the down payment is an uphill task. When one is in their twenties or even early thirties living in the city or […]
Read More