The Struggle of Saving the House and Your Relationship
If the stress of money worries is already niggling, what is going to happen when your mortgage interest rate jumps, asks Lynda Moore.
24 July 2023
In March 2017 I published a blog called Could your relationship survive a 2 per cent mortgage increase? Back then the rates were around 4.59 per cent and an Auckland mortgage was heading towards $800,000. Who would have known then that rates would continue to fall to as low as 2.5 per cent for some, and now in 2023 many homeowners are facing mortgage increases of 4-5 per cent (maybe more) when the fixed term rolls over.
Let’s crunch the numbers. An $800,000 30-year mortgage at 2.5 per cent has monthly repayments of $3,161.00. If that jumps up to say 7 per cent the repayments increase $2,161.00 per month to $5,322.00. Is it any wonder there are a lot of stressed couples worried about how they are going to find another $2,000 a month to service their existing mortgage.
On top of the mortgage there are all the other expenses that go along with home ownership like rates, insurance, maintenance. Plus, additional transport costs if you moved further away from where you work to get onto the property ladder. These are all increasing as well as the general cost of living. It’s beginning to feel like a perfect storm for many homeowners.
What looked like a great idea when you purchased your home and took advantage of the “cheap money” may not be looking quite so rosy now. I am sure there are some days when you wish you hadn’t. Maybe that happens on the days when you have to say “no” to activities you want to do. Date nights have gone out the window, and weekends away with friends … don’t even think about it!
How does this make you feel? What is the conversation with your partner?
Philosophical: “We knew we would have to make sacrifices when we bought the house, it will be worth it in the end.” Or a little more resentful: “Why did you talk me into this? This house feels like a noose around our necks. We have no life and too much stress.”
If you have a surplus you are in a better position to cope with a rate increase. But let’s face it, unless you are a really good money manager you may well have been spending the surplus on lifestyle.
If the stress of money worries is already playing on your mind and niggling at your relationship, what is going to happen when the interest rate on your mortgage increases?
Could your finances handle it? Could your relationship?
Where is this additional money going to come from?
If you have already cut your lifestyle just to get into the property you may already be feeling a little trapped. Now you must find significantly more money each month to make ends meet.
There are a couple of short-term solutions you could look at. How about taking in a flatmate or two or switch to interest-only for a year or so. Both these options will give you a bit of breathing space, but may not be that palatable in the long term.
But what if you already have flatmates and are on interest-only? How much stress are you under now? And how much of that stress is affecting your relationship?
Money stress is the main contributor to relationship breakdown.
If you struggle to talk about money, then this scenario could break you.
The dos and don’ts
Here are a few dos and don’ts that you can talk about. Be aware of which ones impact you so you can work through them together.
Don’t bury your head in the sand and hope it all just goes away and will magically sort itself out, it won’t!
Do the calculations. When are the interest rate increases going to impact you? How long have you got to plan before the rate goes up? What is the increase likely to be?
Do the hard yards and look at your numbers, what is coming in and what is going out? How can you increase what is coming in? How can you reduce what is going out? In other words, build a money plan. Once you have your money plan start to increase your mortgage payments in small steps; it might be $100 extra in month one, then $250 in month two. Whatever gains you make in income, and reduction you make in expenses, apply that immediately to your mortgage payments.
Do keep the lines of communication open between you. It is likely one of you will be more stressed than the other. This is the time to pull together as a team, not pull apart. Acknowledge if you are stressed, frustrated, upset or angry. It’s important you still do “fun” stuff together and with friends. Swap dinners out for picnics at the beach, or potluck dinners with friends.
Do acknowledge that you aren’t in this boat alone. You will have friends in a similar situation, so brainstorm together; what are they doing to make changes? Support each other, make it OK to talk about money.
Do explore all the options available to you, even if you think they sound crazy; it’s called a tabletop discussion and nothing is a bad or dumb idea. Then get good advice (not your mate at the pub or Mr Google); you want personalised advice that looks at your situation, not comparing you to everyone else.
Don’t get caught short either financially or lose your relationship just to keep the house. Home ownership is supposed to be a pleasurable experience, not a millstone round your neck. There is no shame if at the end of a number-crunching exercise you decide that the best decision is to sell the home and invest the capital (not in stuff, but with the advice of a financial adviser) and go back to renting for a time.
If you want to get really clear about your money and need some help with the decision-making process, head to moneymentalist.com and come and talk to me.
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