Freezing Mortgage during Coronavirus (Covid-19)
Thinking of a freezing your mortgage during the this Covid-19 Pandemic? Make sure you know what you are getting yourself into.
The current volatility of market conditions during the Covid-19 pandemic is causing much anxiety for everyone and unfortunately with many people being stood down without pay or even losing their jobs, the top most issue for many people is ensuring that they continue to have food on the table and have a roof over their heads.
Undoubtedly as it has been reported in the news recently, many of the big banks are being sympathetic to an extent with mortgage payments and are currently offering a variety of mortgage payment deferrals or pauses for up to 6 months (i.e. freezing your mortgage) – However, it comes at a price – and you need to be aware of how it may impact you for the long term.
The catch of this mortgage pause is the concept of interest capitalisation – this is where interest you stopped paying during the period of pausing your mortgage payments gets added to your outstanding loan balance.
To give you an example, if you have a $450,000 home loan at an interest rate of 3%, you would be paying $1,125 a month in interest and if you decided to pause your repayments for up to 6 months, the total of $6,750 in delayed payments of interest will be added to your current outstanding balance.
Whilst some of the good news is that it won’t affect your credit rating in current situation should you wish to freeze your mortgage (read more about that here), it may however have a long term impact on your ability pay down that loan, as it becomes a case of owing even more to your bank after this crisis is over.
It is understandable that for a number of people, this may be the only way out given personal circumstances, and whilst your inability to pay your mortgage may hopefully be just a short-term issue, you need to be aware the situation of interest capitalisation may not disappear even in 6 months.
Ensure you have a chat with your bank or mortgage lender to see if there are other options available to you, including switching payments to interest only, refinancing your mortgage with falling interest rates, or even using a redraw facility. Make sure that you research all options available to you and do your calculations before going down the path of mortgage deferral.
Also consider other ways of getting money into your pocket without necessarily freezing your mortgage payments.
- Ask your credit card companies if they can waive interest charges and late fees.
- Check if your car loan repayments can be changed to interest only payments.
- Check if you may qualify for Job Seeker payments – register your intention to claim via your MyGov account.
- You may be able to draw down your superannuation up to a value of $10, 000 for FY19/20 as well as an additional $10,000 in FY20/21 depending on meeting select criteria (seek advice from qualified advisors prior to taking this action).
However, whilst deferring the housing loan may be one area of concern, there may be some of you who are facing additional debts that are also putting immense pressure on you, and you would like to know what all your options are for your complete and total financial position.
Our advisor Andrew has over 25 years of experience dealing with a variety of financial circumstances and is ready to help provide his professional advice for your individual situation. Read what his clients, who have sought his help over the years, have to say about him here. Seek professional help and make an informed decision about your future so that you can be better prepared for the end outcome
As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.
For Ross, it’s important to see the people behind the financial problem –not just numbers.
Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.
The unit she & her husband live in is not owned by them, but subject to a 20-year lease.
The money to be repaid by the management was due only at sale, when the client finally left the retirement village.
Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.
Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.
The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.
The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.
The moneys paid represented about 75% of what would have been available to creditors if they waited two years.
It is a win for the client and for the creditors.
I made an appointment with Andrew after finding him on google. I was nervous and apprehensive about what to expect but he made the process of bankruptcy extremely uncomplicated and stress free, allowing myself the opportunity to get the fresh start I was so desperate for. Thank you Andrew I could not recommend you enough.
Making the decision to go bankrupt was not easy however once I had spoken to Andrew i felt all my anxiety disappear. Andrew does not judge you and he has an innate ability to put you at ease. He took care of the whole process for me again reducing the stress involved with completing paperwork.
Thank you very much.
I will definitely recommend Andrew Bell to anyone contemplating bankruptcy. Don't wait! Andrew is there to help. With his knowledge, he can advise you of the best path to take and assist with the mind boggling paperwork.
Best of all, he is there for you through your entire bankruptcy period. Get your life back, it's not as bad as you think. Thank you Andrew for lifting the burden and allowing me to move on.
I saw Andrew for 'advice only' on possible bankruptcy due to a divorce. Left an hour later with the paperwork all done and feeling like a new person!
Andrew was extremely welcoming and made me feel so comfortable with my decision to proceed immediately.
This was the best investment I have ever made and cannot speak highly enough of Andrew. He doesn't just give excellent service his follow up afterwards is amazing. Thankyou Andrew you made my 'new' life so easy to achieve!
Andrew was very helpful in helping me through the bankruptcy process, as a single mother left with a massive debt from my ex and our previous marriage. I was struggling to keep my head above water on a week to week basis.
Andrew made me feel at ease immediately and helped me every step of the way, he happily and professionally answered any and all questions I had before, during and after the process. Thanks so much for your help Andrew!
Would highly recommend Andrew to anyone having financial difficulties. Andrew made me feel very comfortable - he took care of everything and keep in regular contact with me throughout the whole process.
Service was fantastic and he also keep in regular contact with me when everything had been finalised Thanks Andrew! can now get my life back on track.
Very prompt service and excellent source of knowledge and information, I highly recommend Andrew's service for a quick turn around of circumstances.
Andrew put my mind at ease in one easy appointment. Very satisfied with the outcome and service provided. Highly recommend Andrew.
Andrew was a steadying hand with his advice.Showing that things aren't as bad as first thought nor any obstacle insurmountable. If you have questions needing answers, Andrew is the person to ask. Thanks for your advice Andrew.
Andrew was very knowledgeable, caring, helpful and compassionate when I went and saw him. He made me feel that I wasn’t the loser and failure that I thought I was being. Even down to the box of tissues on the table.. which I needed. Highly recommend to go see Andrew if your struggling. There is life after!
Andrew and his team do an excellent job of helping their clients with bankruptcy advice and it is a pleasure to work with him.
Don't hesitate contacting Andrew, I was stressed, struggled sleeping through debt. Andrew put me at ease. He listened to my situation and we decided on my next move. Andrew is professional and easy to talk too. I would recommend highly to anyone who wants help to give him a call. I appreciate your support Andrew. Regards Brett.
Andrew has given me back my life!!! After living paycheck to paycheck, I didn’t know what to do. Until I made the big step and booked an appointment with Andrew. As soon as I left his office I felt a huge weight lifted!!!
Andrew was prompt, organised, friendly and efficient with the processing of my documents and made everything very simple for me so I didn’t need to deal with the added pressure and stress. Thank you Andrew for allowing me to start afresh and getting it done within a matter of weeks.
Fill the form below to download our Free Expert Bankruptcy Guide