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How do you calculate mortgage stress?

Discussion in 'Real Estate' started by mtkirwan, 17th Jan, 2008.

  1. mtkirwan

    mtkirwan New Member

    Joined:
    17th Jan, 2008
    Posts:
    1
    Location:
    Melbourne, Victoria
    Hi,

    How do you calculate mortgage stress?

    If my income is $100,000 and the amount of tax I pay is $30,000 and my yearly mortgage repayments is $35000 is my mortgage stress 35% (35000*100/100000) or 50% (35000*100/(100000-30000)?

    Kind Regards,

    Matthew
     
  2. DaveA

    DaveA Well-Known Member

    Joined:
    19th Feb, 2007
    Posts:
    617
    Location:
    Sydney, NSW
    i think its off gross income.... would love to have it cleared up though...
     
  3. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    General rule-of-thumb is 30% of gross income, and this is the figure that associations such as the Housing Industry Assoc (HIA) tend to base their mortgage stress figures on. Last year there was a Federal inquiry amid growing concern about loan foreclosures and home repossessions. It came after the Australian Prudential Regulation Authority found that one in four borrowers is now repaying a loan above the traditional 30% threshold, forcing some people below the poverty line.

    However, with increasingly easy credit and creative financial products being offered since the mortgage industry was deregulated years ago, it's all too easy to fall into the trap of simply believing the approval given, without running your own numbers. Always conduct your own "mortgage stress" levels realistically, and allow a buffer for at least a 2% interest rate rise.