Deferring your home loan during the 2020 recession
Now that we’re officially in the midst of a recession, it’s been announced that mortgage deferral options have been extended until January 2021 for those still in financial distress.
By the end of September, 393,000 mortgage deferrals across the country, worth $160 billion, were in place with lenders. This equates to one in 10 home loans customers, who were allowed to stop repayments without going into default.
If you’re one of these mortgage holders who hit pause this year you can expect a call from your bank to see whether you are able to restart repayments again.
From October 1, most lenders will offer homeowners the following options:
- Resume full repayments
- Switch to interest-only or part payments
- Defer for a further four months, but you will need to prove you are still facing financial hardship
- Sell the property
However, it’s wise to contact your bank yourself if you haven’t heard from them as it’s important to continue to make payments until you know your deferral or other new options are approved.
If you don’t, you may accidentally default, which could impact your credit history.
How do I defer my home loan?
You can still apply to defer your mortgage payments but you’ll need to prove your financial hardship.
Simply contact your financial institution and register for the COVID-19 support package.
Again make sure you are approved before you stop your repayments.
Big banks ANZ, Commbank and NAB have all confirmed they are offering assistance periods of up to six months. Westpac have confirmed they’ll offer a further three months, but an option for a review after that period.
Some things to consider
Taking a mortgage break may cost you up to $20,000 by the end of the loan due to the extra interest you’ll incur throughout the life of the loan.
If possible you may wish to instead consider changing to interest only repayments so that your home loan interest doesn’t continue to compound.
Your other option is to look at restructuring your loan. For example by moving from variable to fixed rates. Or refinance with a different lender.
To explore the options available to you contact us at North Brisbane Home Loans.