Financial Hardship

Are you experiencing financial hardship?

 

We are here to help!

Banks and financial institutions are required to offer hardship assistance if you find yourself in financial difficulty.

With the onset of Coronavirus (COVID-19), banks and financial institutions have announced a raft of new stimulus packages to assist individuals, households and small businesses experiencing hardship.

If you would like to know more about the Coronavirus (COVID-19) support packages offered by banks and financial institutions, you can check their individual websites or contact your local MoneyQuest mortgage broker who can assist.

In the meantime, should you be experiencing financial hardship, here are some options to consider.

 

Pause Your Home Loan Repayments

If you ever experience financial hardship, particularly due to COVID-19, you may apply with your lender to put your home loan repayments on hold for up to six months.

Please note, interest will continue to be charged and added to your loan during the period your repayments are paused.

This means that your home loans will be charged interest on interest.

However, if you do require immediate financial assistance, this is one option that can help preserve your money until you get back on your feet.

To apply to pause your repayments, you can contact your lender (details below) or your local MoneyQuest mortgage broker for assistance.

 

Consolidate Your Debts

To reduce your overall monthly commitments, you can apply to roll up all of your debts into one loan with the intention of reducing your overall monthly repayment.

Naturally there is a lot to consider but your local MoneyQuest mortgage broker is here to help.

 

Redraw Facility

If your home loan has a redraw facility and you have made additional repayments, you may have accumulated a buffer that you can now redraw to assist you in your period of hardship.

 

Reduce Your Repayments

Given the recent reduction in home loan interest rates, your present repayments may be higher than the minimum required.

To assess whether you can reduce your repayments, contact your local MoneyQuest mortgage broker to calculate for you.

 

COVID-19 and Your Home Loan

Frequently Asked Questions

 

After speaking to many of our clients we compiled a list of commonly asked questions and answers.

1. What are the first steps home loan customers should consider if they encounter financial hardship?

i. consider accessing additional funds you may have available in your home loan redraw facility;

ii. consider utilising any funds you may have in an offset account;

iii. consider reducing your repayments to the minimum monthly repayment amount;

iv. consider if interest only repayments might be a better option;

v. check if you have insurance that may cover you in the event of illness or involuntary unemployment.

2. Are all lenders offering their customers the opportunity to pause repayments for up to 6 months?

No – while most banks are offering a repayment pause of up to 6 months, non-bank lenders are assessing all hardship enquiries on a case by case basis.

To find out the COVID-19 support package your home loan lender is offering, we suggest you check their website or contact me for more information.

3. Is a repayment pause available on both home loans and investment property loans?

Yes – owner occupiers and investors financially affected by COVID-19 who have either principal and interest or interest only repayments are eligible.

4. Does taking up a COVID-19 repayment pause impact your ability to access the funds you have accrued in your redraw facility?

Yes – most lenders will zero out your redraw when your repayments are paused, so if you do have funds accrued you should consider transferring them to your daily transaction account before applying for a repayment pause.

5. What happens to your repayments when they are paused?

You will not be required to make any repayments during the pause period.

Interest will continue to be charged and given you will not be making repayments; the unpaid interest will be added to your home loan (capitalised) and you may end up paying more interest over the life of your home loan.

6. What happens at the end of the assistance pause period?

At the end of the COVID-19 Assistance period your home loan repayments will start again.

Some lenders are offering two options to catch up on the repayments that were paused:

i. extending your loan term by a period equal to the duration of the assistance provided and adjusting your repayments accordingly, or

ii. retaining your original loan term and adjusting your repayments to ensure you pay your loan off over the original loan term.

Note: the majority of lenders are only offering option ii, please check with your lender or again contact me for more information.

7. What is interest capitalisation?

When you make regular repayments on your home loan with a principal and interest repayment type, you are paying both the interest charged for that period as well as some of the principal amount (the original loan amount).

If you choose to pause your repayments, interest will continue to be charged to the total home loan amount outstanding. Given you will not be making repayments, this interest will continue to be added and as result your home loan amount will increase during the period your repayments are paused.

8. Can I make additional repayments during the repayments pause period?

Yes – you can make uncapped additional repayments on any variable interest rate home loan.

However, fixed interest rate home loans generally have an annual limit for additional repayments during the fixed period. If you make repayments greater than this annual limit, you may be charged an early repayment fee and should consult your home loan lender or broker (me) before making such a payment.

9. What happens if interest rates on my variable rate home loan change during the period my repayments are paused?

Interest on variable rate home loans will continue to be charged at the applicable daily interest rate and may change from time to time.

10. Will borrowers taking up the repayments pause have a black mark recorded against their credit report?

No – during the period you put your repayments on hold as part of a COVID-19 assistance offering, your home loan will not be reported to credit reporting agencies as being behind on repayments – so long as your repayments were up to date at the time your repayments were paused.

If you have any additional questions, please do not hesitate to contact your MoneyQuest broker for a confidential discussion or call us on 1300 886 100.

Bank of Melbourne
Bank of Queensland
Bank of Sydney
Commonwealth Bank
Heartland Seniors Finance
La Trobe Financial
Latitude Financial
MoneyQuest Home Loans
Pepper Money Australia