As many businesses are facing hardship due to the effects of COVID- 19 and the mandatory restrictions on businesses that have been enforced by the government, Australians with ongoing mortgage obligations are inevitably feeling the pinch.
So what is the latest on the big banks allowing mortgage repayments to be put on hold?
Well, the big four banks have each announced that people will be able to place their mortgage repayments on hold as a result of being affected by COVID- 19.
Commonwealth Bank have announced the following
- Customers with home loans can defer payments for up to 6 months
- Interest will be capitalised
- Interest and charges will be added to your loan balance
- At the end of the support period, your loan balance will be recalculated
- Repayments will remain the same by extending the loan term, so repayments will not increase.
Westpac Bank have announced the following
- Customers with home loans can defer payments for up to 3 months
- After the initial 3 month deferral period, a review can take place to extend the deferral by a further 3 months
- This deferral scheme applies to those who are unemployed as a result of COVID – 19
- Deferred interest will be capitalised. This means repayments will increase for the remainder of the loan term
National Australia Bank (NAB) has announced the following
- Customers with home loans can defer payments for up to 6 months
- There is a 3-month checkpoint that the bank will conduct
- If you are a home loan customer affected by COVID – 19, you will be eligible
- Owner-occupiers, investors or those on a principal and interest or interest-only repayment schedule are included in the deferral scheme
- Customers are still able to redraw during this period
ANZ has announced the following
- Customers with home loans can defer payments for up to 6 months
- Interest will be capitalised
- As with NAB, the bank will check in with their clients after 3 months
Bendigo Bank has announced the following
- Customers with home loans can defer payments for up to 6 months
What else do you need to know?
Deferring your repayments may be the best option for you at the moment, however, make sure you understand the terms of these negotiations with your bank.
Each of the big four banks has announced interest capitalisation.
So what does Interest Capitalisation mean to you?
This means any interest that you do not pay during this deferral period are then incorporated into the outstanding loan balance.
For example:
A $400,000 home loan at an interest rate of 3%, the home loan owner will be paying $1,000 a per month in interest.
Pausing your home loan repayments for six months means that $6000 of interest will be included in your outstanding loan balance.
So, in essence, your home loan balance will increase from $400,000 to $406,000 after the deferral period.
So what next?
Make sure you get in touch with your bank to find out how to apply to defer your repayments.
The big four banks have been stepping up to help support their customers affected by COVID – 19 and restrictions on trading through the foreseeable future.
Make sure you stay up to date with our blog, stay tuned for more information on support measures available to individuals and businesses going through financial hardship at this time.
