If you’re like most, mortgages are a necessary evil if you hope to own a home. But they can take a toll on your health.
Research shows that too much mortgage debt, in combination with non-secured debt like credit cards, car loans and lines of credit, can destroy sleep patterns and contribute to high levels of stress.
- 77% of working Canadians admit to experiencing uncomfortable levels of stress, 40% of which was attributable to personal/household finances in 2019 (up from 35% in 2017), according to a 2019 Sunlife survey.
- Roughly 10-16 million Americans (Canadian data isn't available) are “suffering terribly due to their debts, and their health is likely to be negatively impacted,” according to an AP-AOL poll. That was back in 2008. Today in Canada, debt-to-income levels are 21% higher.
- Among the people reporting high debt stress in the AP poll, 27% had ulcers or digestive-tract problems, compared with 8% of those with low levels of debt stress.
A recent report on Ontario adults found a large proportion experienced debt-related stress, primarily those who are female, separated, divorced or from a lower-income household.
“Debt stress was significantly associated with psychological distress, as well as self-rated overall mental health and general health,” according to the study. “Adults who reported greater debt stress were at higher odds of moderate-to-serious psychological distress, poor-to-fair self-rated mental health, and poor-to-fair self-rated general health compared to those with lower levels of debt stress.”
The findings provide a clear indication that debt-triggered mental illness is real, and it’s likely having an impact on life expectancy.
Older Age Groups Most Afflicted
Financial stress tends to impact older borrowers even more, given many are on a fixed income.
An Australian study on mortgage stress last year found that “Older mortgagors report lower mental health and higher psychological distress scores than older outright owners.” The study found that the mortgage itself isn’t necessarily the main culprit. “It is when older mortgagors experience difficulty in meeting mortgage payments, that wellbeing declines.”
The data is similar for older mortgagors in the U.S., where debt loads have also grown considerably.
Not only that, in Canada seniors are leading the way with rising 90+ day delinquency rates—up 9.4% in Q1 2019 compared to the prior year, according to data from Equifax.
This is a trend that has been going on since late 2015, according to CMHC's latest Mortgage and Consumer Credit Trends report.
It suggests there is a meaningful share of consumers over 65 with a mortgage loan that "may be more financially strained and vulnerable," which could lead to "potential situations where they could be less able to meet their payment obligations on time," the report notes.
How to Reduce Mortgage Stress
Here are a few tips to help ease the burden:
- Settle for less house: A bigger home in a nice neighbourhood near work is great. Unfortunately, most people think the same way and prices reflect that. A longer commute, choosing an up-and-coming neighbourhood and/or sacrificing square footage is often the answer to smaller payments and less stress. At least it gets you in the market so you can start building equity and upgrade later. Just be sure that any extra commuting costs don’t offset your mortgage savings.
- Change your amortization: Your mortgage amortization may be based on 25 years, but you don’t need to have mortgage debt hanging over your head that long. Most mortgage products allow you to make additional payments to get mortgage-free faster. Unfortunately, increasing payments isn’t realistic for people with heavy debt loads. So, the other option is to extend your amortization to lower your payments. Going from 20 to 30 years can slash your payment by over 20%. You can always make pre-payments later to bring your effective amortization under the standard 25 years.
- Build up a Mortgage Payment Reserve: Knowing you have money to cover a few months of bills can provide tremendous mental relief. The best tip is to start now, as hard as that may be. You may feel like you have more pressing needs for your money, but if you start small and right away, you’ll get into a saving habit. By allocating only 4 cents of every dollar to a TFSA, average Canadians can build up a solid contingency fund in just 24 months. And for many, side hustles are often the ticket to padding that “mental health fund” even quicker.
- Seek help if you need it. It’s easy to throw out tips like these, but some folks have a much deeper spending problem and it can be psychological and/or circumstantial in nature. There’s no shame in seeking professional help, whether that be a financial advisor, credit counsellor or other.