With COVID-19 we are living in times that are nothing like “normal” and we are all having to adapt.
One of the largest concerns for many families is the financial impact of not being able to work, and the implications of paying the mortgage and other loans.
Managing Your Home Loan
We understand the concerns and as mortgage advisers we are here to get the answers for you.
The Government have already said that they are working with the banks to ensure that there will be help.
The help may be by providing mortgage holidays, allowing you to pay interest only or extending the loan terms to lower your repayments. We do not expect the banks to stop charging you interest unless they are required to by the Government, and that is unlikely but maybe not impossible.
Managing your home loan may be getting harder … a lot harder!
It is important that you do not feel alone on this as it’s something that will be affecting a lot of Kiwi’s and there is no simple answer or way to avoid this. The banks have said that they will help, but they are also in business to make money for their shareholders so you need to always remember that.
It is important to understand your options before you speak to the bank.
Mortgage Holidays – a mortgage holiday means that you do not need to make the regular mortgage repayments for a period of time. The time-frame is normally for 3-months and the bank will add the interest to your loan balance which means you will still end up paying your mortgage but it gives you a short time to take a breath. We have heard the Government suggesting that this may be increased to 6-months but nothing has formally been announced yet by the banks.
Interest Only – this is often a good option as it reduces your repayments but you are also not increasing your debt.
Extending Loan Term – another way to reduce your repayments is to spread the payments over a longer term or timeframe. You may only have ‘say’ 20-years remaining on your mortgage and the bank may be happy to extend the term by ‘say’ 5-years or even 10-years which reduces your repayments.
Loan Top Ups – sometimes the best option is to do a top up on your loan. This can give you the money to pay your next few loan repayments but more importantly it can be used to reduce other financial commitments like credit card debt, a hire purchase or a personal loan which may have higher interest and higher repayments.
Caveat Loans or Second Mortgages – your existing bank may not be able to help with a loan top-up and therefore your mortgage adviser may suggest a loan with another lender. If that loan is secured with a caveat or a second mortgage it will reduce the cost, although it will always be a lot more expensive than a top up with your existing bank.
Refinancing Your Mortgage – if you are not happy with your existing bank or lender then refinancing your mortgage may be the preferred option.
Apply For Financial Hardship – this is typically a last resort but is something that all banks and lenders need to consider and work with you on. Prior to applying under the hardship criteria you should consider all other options including applying for the release of Kiwisaver monies via the financial hardship too.
Everyone is going to have a different situation and therefore should consider all options.
Times are not easy and you may not even want to consider any of the options listed above; however the advice is to at least know what the options are and be prepared to act early rather than wait until you are really struggling.
Of Course We Are Here To Help
We have been in business for over 20-years now and something like COVID-19 is not going to change that!
We are here to help and offer advice.
Please feel free to contact us to discuss your situation regardless if you have been a client of ours before or not.
We know that there are a lot of people that will be trapped at home and just need to speak to someone that can give them some advice on what is available or how to approach the banks etc. We live and breath finance every day so are happy to be the person that you can talk to.
You can speak to any of the advisers here and even arrange an online conference session if that is your preferred option.