COVID-19 Mortgage Holiday - Deferment
NOBODY is calling this a Holiday!
While you're stuck at home worrying about your health and your future, the last thing you need to think about is whether you can keep a roof over your head while juggling changes to your social interaction and how to keep everyone fed, safe and happy.
Thankfully, our Prime Minister and Reserve Bank fully appreciate this situation and have worked very constructively with our major Banks to come up with the Mortgage Repayment Holiday which will help folks stay put during this crisis. And hopefully, get a bit more sleep.
Unfortunately, the term 'holiday' is not really representative of the plans on offer. Most banks already have Deferred Payment options for stressed borrowers. This allows people to apply for relief from making repayments or the choice of paying Interest Only on their home loans for a specific time frame while they recover from an event like job loss or other personal crisis. But this is no ordinary crisis. It's important to weigh up the facts of each in light of your personal situation, goals, age and stage of life and how this crisis impacts you. It may be too early to know the extent of the issue, so banks are working with folks on a 6 to 12-months plan of recovery. Please appreciate that different options on offer (no repayment or interest-only repayments primarily) may result in you paying more interest over the life of your loan or extending your loan terms, so be sure and consider this carefully.
If you want to take advantage of our historic low rates (under 3% in many cases) and refix your loans now, please be aware that break fees will still apply. A conversation with your adviser can help you assess your best options either way.
Bear in mind most banks have literally thousands of applications flooding in their doors, so it could pay you to contact your essential mortgage adviser who is working from home for an honest assessment of your options, and if you do qualify, which many will do, your adviser can apply on your behalf. We are hearing good responses so far because 1. Banks want to keep their clients happy and 2. Nobody wants to be caught off guard by loan repayment defaults and the ensuing stress this causes everyone. The good news is that Banks will not report your repayment plan as a default to the credit agencies. Just to be sure, you MUST keep making your regular repayments until you are in a new plan - so that you are in good standing at the time your application is being considered.
This crisis, unfortunately, takes me back to 2007-2008 GFC or what we called the Housing Crisis when I lived in the USA. I worked with numerous clients during the ensuing years to preserve their equity in their homes and get back on track. Many, many people lost significant value in their homes, their livelihoods and a slow government response. The big difference with our current pandemic is that while we are now experiencing a new threat, it landed during a strong time in the economic cycle of New Zealand. As a result of our strong surpluses, our government has been swift to respond with welcome wage and business assistance.
I appreciate that we are very fortunate for a nimble and compassionate New Zealand government that is working together to help everyone succeed and get ahead of this. And speaking of getting help: it takes literally 5 minutes to apply for COVID-19 Financial Support, so please avail yourself of this help right away!
If you want a free conversation about your mortgage options, just enter your details on my Contact Susan page or drop me a line. I'm all ears and I've been here before so I've got all the tools.