A shocking 1.1 million Australian households are struggling to pay their home loan, new research has revealed.

The study from comparison site Finder found more than one in three mortgage holders were finding it tough to keep up with their loan in January, as higher rates continue to put pressure on household budgets.

With the increased costs, mortgage holders are being forced to increase the length of their loan to stay afloat and keep up with monthly payments.

Finder home loan expert Richard Whitten said it was better to refinance sooner rather than later in the current climate.

“Millions of Aussie borrowers are experiencing financial stress due to the fact that their monthly mortgage repayments have blown out so rapidly,” Mr Whitten said.

“The start of the year is a great time to assess where you might be able to save. Your home loan is the best place to start, as it’s likely your biggest expense,” he said.

Mr Whitten said it was crucial that Australians pick a home loan that would give them the best deal.

When refinancing, 18 per cent of refinances extended the length of a home loan, according to Finder, adding an average of three and a half years back onto their mortgage.

“A common reason customers look to refinance is to reduce their repayments, often by extending their loan term back to 30 years,” Mr Whitten said.

“Mortgage holders are looking to free up some spare cash, but it could be a much more expensive option long term,” he said.

Negotiating with your current lender was the first step according to Mr Whitten, and looking at what other rates were available.

“You can try to stick to your original loan’s term if you do decide to refinance so it doesn’t reset the clock,” he said.

Looking for a loan that meets your needs including whether it has an offset account, how much the added annual fees are and what else the package offers you, Mr Whitten said.

“You can start a new 30 year term but focus on keeping your repayments higher than the required monthly repayment,” he said.

“Your aim should be to pay off the new home loan faster either with extra repayments or better yet, by building up your offset account.”

Sourced from realestate.com