With lockdown restrictions tightening
across NSW and extending in Victoria, Australia’s banks have rolled out extra
support to affected customers.
This week our largest bank, CBA, has
extended its foreclosure moratorium, which means the bank won’t evict a
customer in arrears until at least February 2022.
Support being offered by Australian
Mortgage deferrals (size and scale of
this assistance differs between banks).
Loan deferrals for small businesses for
up to three months (ANZ offering two months).
Refunds on merchant terminal fees for
Waiving of term deposit notice periods
Additional relief from CBA and Westpac
No foreclosures until Feb 2022.
Automatic two-month mortgage deferral
for customers in hardest-hit locations and industries and others severely
impacted by the lockdowns.
Three-month deferrals for small
Interest rate reductions on mortgage
and credit card debt.
Mortgage, credit card, and personal
loan deferrals, determined on a case-by-case basis.
For business customers, up to $15,000
free temporary overdraft for a max of 45 days to help with cash flow.
The real cost of a home loan repayment
While a mortgage repayment pause may
offer short-term relief, people taking out this option should be aware of the
RateCity.com.auanalysis shows a two-month deferral on a $500,000 loan with 25
years remaining could cost an extra $1,712 over the life of the loan, paying an
extra $21 a month after the deferral ends. If, after the deferral, the person
instead keeps their repayments the same and extends out their loan term it
could cost an extra $4,408 over the life of the loan.
Sally Tindall, said:
"As helpful as they can be to get you
through a tight spot, a mortgage deferral is by no means free.
"Regardless of what your bank offers
you, get some independent advice from a financial adviser or a free financial
counselor via the National Debt Helpline.
"It’s not just the banks offering help,
most service providers have hardship policies.
"If you’re struggling, don’t just cross
your fingers and hope things improve, ask for help. It’s important to talk
through your options before you miss a bill so you can potentially avoid extra
The cost of a two-month pause on a
$500,000 loan balance with 25 years remaining:
paid over the life of the loan
to repayment after pause
in the loan term
Notes: Based on an owner-occupier
paying principal and interest on the average rate of 2.69%.
People who are further into their loans
will pay less.
Potential alternatives to pausing
Use the money in your offset or redraw
Request a rate cut: variable rate
customers should ask their bank for the new customer rate as a minimum.
Some customers might switch to a lower fixed rate.
Switch to part payments or
interest-only repayments: paying something is almost always better than
Tips for reducing the impact of a
Try to pay off some of your loans
during the pause.
When the pause finishes, see if you can
make extra repayments to catch up.
Negotiate a lower interest rate with
Call an independent financial advisor
or a financial counselor for advice.
The National Debt Hotline is: 1800 007 007.
Article Source: propertyupdate.com.au
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Thursday, 22 July 2021