Many Australians are struggling to make home loan repayments as the coronavirus pandemic continues to ravage the economy. Most Australian lenders will let you pause or defer your mortgage repayments for between three and six months. This is also known as a mortgage repayment holiday.
You can temporarily stop making repayments, but you will need to pay the full amount back later. In most cases you will also be charged interest during the deferment period, which you also pay back over the remaining loan period. So this means your later repayments will rise.
Alternatively your lender may let you extend your loan term, keeping your repayments lower but making you repay the loan for longer to cover the extra interest.
Read on to find quick summaries of lender policies and links to their coronavirus mortgage support pages, plus explanations for some of the technical terms contained in these policies and proactive tips for getting your mortgage repayments under control.
Most Australians bank with the Big Four (CBA, NAB, Westpac and ANZ) and they have the majority of mortgage customers too.
Here's how the Big Four are helping borrowers hit by COVID-19:
The Commonwealth Bank is offering repayment deferral for all home loan customers for up to six months. The bank will even offset the extra interest charges that this deferral will accrue, meaning you won't end up paying more interest (you will still need to make up the deferred repayments later, of course). The bank has also lowered interest rates on some of its fixed rate products for new customers.
But if you have made extra repayments on your loan (your redraw facility) the bank will draw down on this first. CBA suggests "If you need to access your redraw during the support period, transfer your available redraw to another account now."
Customers with home loans can pause repayments for up to six months. This includes investors and owner-occupiers but excludes borrowers with line of credit loans. If you pause repayments your interest will continue to be calculated on your loan balance. You can organise repayment changes using the NAB app. NAB has also lowered fixed home loan rates for new customers.
Westpac loan customers who have lost their job or substantial income because of COVID-19 can apply for a three-month repayment pause followed by a second three-month pause (subject to review). Lower fixed rate owner-occupier loans are available for new borrowers too. Borrowers who have been with Westpac for more than 12 months may also have the option to reduce their repayments temporarily by up to 50%.
You can use extra repayments in your redraw facility to cover repayments or move that money into another account.
The bank is cutting its variable home loan rate by 0.15% (effective 27 March). This will make repayments cheaper for borrowers with variable loans. Borrowers can pause repayments for six months, with a review three months in. Interest will be charged during this period and added on to the loan balance, meaning you will have to repay it later.
If you're still employed but have less income then you may have the option of switching to interest-only repayments for a while. This will reduce your repayments in the short term and could offer some breathing space. But be aware that over time interest-only repayments will cost you more because you're essentially adding more interest charges to the loan.
Coronavirus mortgage support from smaller lenders
While we're unable to list every lender and their policy, the list below contains a significant number of Australian lenders outside the Big Four. For the most up-to-date information always check with your lender directly.
UBank. Any UBank customer struggling to make repayments should call the customer support team on 1300 155 426.
St.George, Bank of Melbourne and BankSA. These lenders are part of the Westpac group and have announced similar coronavirus support packages, including up to six months of repayment relief and lower fixed rates for new customers.
Aussie. The mortgage broker and lender is offering support for its customers, but the specifics vary depending on whether Aussie is your broker, or your lender. Loan deferment is an option if you have an Aussie home loan. Read Aussie's full support plan here.
Bendigo and Adelaide Bank. Borrowers can now apply for up to six months of loan relief. The bank is also waiving fees normally charged on debt consolidation and loan restructuring. Read the full policy here.
Tic:Toc. As Tic:Toc is funded by Bendigo and Adelaide Bank its customers are covered by that bank's policies listed above. Read Tic:Toc's statement here.
Macquarie Bank. From 20 March all Macquarie loan customers (including home, car and personal) can "immediately defer their repayments" for six months. You can change your repayment structure via the Macquarie Banking app or call its mortgage support line on 1300 363 330. Read the full policy here.
Bankwest. For now Bankwest is offering three month repayment deferrals for small business customers with home loans. The bank is also offering new, lower fixed rate products. Find more information here.
AMP. AMP's banking helpline is 13 30 30 and the company is publishing regular financial insights related to COVID-19 here.
Suncorp. According to a Suncorp statement all customers have "an opportunity to defer scheduled loan repayments (including interest only) on a case-by-case basis". Customers needing help can call 13 11 55.
HSBC. Defer your payments for up to six months. New fixed rate loans will be as low as 2.25%.
IMB. At the moment IMB has its usual hardship policies in place, which include the possibility of restructuring your loan or deferring payments temporarily.
ING. You can apply for financial hardship or call ING's support team on 1300 349 166. Learn more here.
Virgin Money. Customers can defer repayments or switch to interest-only repayments. Learn more here.
Bank Australia. The lender will waive certain fees and offer a repayment deferral for three months, with the possibility of extending a further three months on review. Learn more here.
Heritage Bank. Fees on restructuring loans are waived, borrowers can pause repayments for up to six months. New, lower fixed rate loans. The bank will also waive default, arrears and dishonour fees.
Will pausing repayments hurt my credit score?
Contact your lender before you miss a repayment. If you can arrange a hardship deferral or reduced repayment with your lender you'll be in a much better position than if you just stopped paying. If you do this properly you may not impact your credit score at all. Learn more about protecting your credit score.
Who is eligible for home loan relief?
Every lender has its own criteria to determine who is eligible for coronavirus support or not. You may have to prove that you've lost a job or income to qualify. Some lenders are extending repayment pauses to all their borrowers, on the understanding that you will end up paying everything back later.
If you've lost your job or had invoices cancelled, retaining a letter of termination or other evidence of income loss is a wise move.
Confusing terms explained
Some of the jargon in lenders' support policies can be confusing. Here are some basic definitions to help you make sense of everything:
Repayment pause or deferral
A pause or deferral of repayments is often known as a mortgage repayment holiday. It means you take a temporary break from your normal repayments while you get back on your feet financially. You will need to cover these repayments later, either by extending your loan for a longer period (thus making more repayments) or by increasing your repayments after the pause period.
Some lenders will pause your repayments but charge interest for those months of non-payment. Instead of making you repay all this interest in one go it is usually capitalised onto your loan. This means the extra costs are added to your existing loan amount and you repay them over time.
Many lenders allow you to make extra repayments. If your loan has a redraw facility you can withdraw some of this extra money to spend if needed. If you're in financial stress but you've made extra repayments in the past your lender may let you redraw this money and convert it to extra repayments. Because this money has already been paid by you, your lender may simply adjust the repayment terms. You will need to arrange this with your lender.
Many lenders mention interest rate cuts in their coronavirus support packages. This is partly because the RBA just lowered the cash rate again, making borrowing costs cheaper. At this stage, most lenders are not lowering variable rates. Some are cutting fixed rates for new customers. But if you've already fixed, well, you've fixed. Your rate won't get lower.
I'm not affected yet, what financial precautions can I take?
There are many steps you can take if you're currently unaffected by financial stress but want to prepare yourself just in case.
If you currently have a home loan, consider the following:
Check your interest rate. Rates are quite low now. If yours has risen over time there might be much better deals on the market. If this is the case, you could refinance (switch) and save.
Make extra repayments via an offset account. Making extra loan repayments reduces your debt and is good financial preparedness if you get affected by coronavirus. You can put the extra repayments directly into your loan or save them in your mortgage offset account (if you have one). The offset account gives you more flexibility to use the repayments later.
Build a savings buffer to cover future repayments. If it's at all possible, build up extra savings now. You can use this to cover repayments if you get sick or lose your job. Again, you can do this via an offset account (and this will lower your interest costs) or any savings account.
Note that if you have other, higher interest debts beside your mortgage then you should get those under control first, if possible.
Please know that whatever financial and emotional stress you're suffering, you are not alone. Call Lifeline Australia on 13 11 14 if you need help.
Need to save some quick cash?
If you're struggling to keep up with your finances - you're not alone. You can save plenty of cash by doing some simple admin with your bills and expenses. Maybe switching credit cards or downgrading your mobile phone plan could save some money.
Richard Whitten is a senior writer at Finder covering home loans and property. He helps everyone understand the ins and outs of mortgages so they can make smarter property decisions. Richard trained as a high school English teacher but found it easier to manage personal finances than a classroom full of kids. Before joining Finder, he edited textbooks and taught English to office workers in South Korea. Richard has a Bachelor of Education and a Graduate Certificate in Communication.
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