It’s been a very unusual couple of weeks as we all come to terms with the current COVID-19 situation.
With many people losing their jobs or working from home and social distancing, none of us know how long this will go on for.
There can be a huge amount of anxiety caused by the ongoing uncertainty and it’s important to check in with each other to support each everyone in this difficult time.
As far as paying your Mortgage, there is help on offer. All lenders have come up with support and ‘hardship’ arrangements and it’s important to know what these mean and how it may impact you now and in the future.
Most lenders are offering at least three months where repayments are not required simply by contacting them and making them aware of your situation. Some are offering a further three months after a check in point at the three month mark.
Do keep in mind when taking up these offers, that a 'repayment holiday' does not mean that your interest has been waived. The repayments (interest) are simply being deferred. The interest will be capitalised – i.e. be added to the loan. At the end of the deferment period either the loan term will be extended (e.g. from 30 years to 30 years and 3 months) or your repayments will increase to ensure the loan is repaid in its original loan term. It’s not something you would just do for the sake of it as it could add interest to your total loan cost.
But if you are struggling to make your repayments or know you will be in the future, do not be afraid to contact your lender and ask for help. I can help you prepare for the call.
Rest assured that these arrangements are NOT reported as defaults and will not impact your borrower’s credit score or your future lending abilities.
Some other options available to you are:
1. If you have funds in redraw or Offset accounts, you could consider using these up these funds first.
2. If you still do have a job, you could consider refinancing to take advantage of cheaper rates (there are some very competitive fixed rate on offer at the moment), a new interest only term or one of the current cash back rebates (up to $4,000) available.
3. Access your superannuation. Details of this below.
Australians suffering financial hardship during the coronavirus crisis will be able to access up to $10,000 of their superannuation early. They will be able to access up to $10,000 this financial year and $10,000 next financial year. Eligible people will be able to apply to access their super accounts through MyGov before July 1 2020. After that, they will be able to access another $10,000 throughout the next three months. The withdrawals from superannuation will be tax free - and available to people on benefits and to sole traders and casuals who have lost 20 per cent or more in working hours or income as a result of the coronavirus crisis.
You can seek to access government support first and only access your Super as a last resort. Using Super as “free money” now could severely impact future earning capacity of your fund. It would be a good idea to seek Independent Financial Advice if you decide to take this option, so you are fully aware of the implications.
But sometimes you do not have a choice and you need to do whatever it is that helps you get through this difficult time.
Here at Volare Home Loans we hope that you, your family and friends look after yourselves during this challenging time. Keep yourself safe and healthy and we will get through this.
Please give me a call if you would like to discuss any of this further or if you have any questions. Take care and be safe.
Catherine Thompson, Principal, Volare Home Loans
Message from CAtherine
Occasionally I come across an interesting article to do with Home Loans. I thought I'd share some of these with you here.