Win at home loans

Should I get a mortgage holiday from my bank?

Should I get a mortgage holiday from my bank?

The idea of a mortgage holiday might sound attractive – who wouldn’t like a break from paying off their home loan?

But this could turn into a sticky situation.

Taking a coronavirus mortgage holiday from your home loan repayments could add to the size of your mortgage, so it is possible that you end up having more to repay when the holiday ends.

For every payment you are not making because of your mortgage holiday, the interest you didn’t pay will be added to the loan balance. 

It can quickly add up, as the hypothetical example given by uno mortgage broker Amanda Denham shows.

Imagine that someone has just started paying off a $500,000 loan with a 3% interest rate and a 30-year term. If they took a six-month mortgage holiday, that would add an extra $7,547 to the total loan balance.

After the six-months the homeowner will have to either keep paying back the loan for a few months past the 30-year term or bump up their repayments from $2,108 per month to $2,139.84.

Calculate the real cost of a mortgage holiday

Explore other options 

Of course, some people have no option. If it’s a choice between not being able to pay your mortgage or a mortgage holiday, then the holiday might be the best option.

But Denham says before you take that step you should contact your mortgage broker to explore other strategies.

It could be that you maybe have made extra repayments in the lead up to the crisis and your home loan might have a redraw facility which you can use to meet your mortgage payments.

Going back to your existing lender and trying to negotiate a cheaper rate is another good idea and Denham says even a small reduction can make a big difference for some people.

There is also the option of refinancing your home loan with another lender offering a cheaper rate. Several are currently offering rebates for refinancing, which will be more than enough to cover the fees.

Can I get a holiday?

Mortgage holidays are more readily available to borrowers who have a good repayment history with their lenders.

Lenders assess on a case-by-case basis, but in general they will want to know that your financial hardship is the result of a short-term change of circumstances, not something that is likely to be ongoing for several years.

Different banks have different policies on mortgage holidays, with three or six month holidays on offer, and they vary in how they assess customers’ eligibility.

For that reason, it’s a good idea to consult your mortgage broker, who can help you gather the necessary documentation and guide you through the application process, says Denham.

You can reach one of uno’s expert brokers from 8.30am – 6.30pm Monday – Friday and 9am – 5pm on Saturday. You can reach us on 133 866 or by email on contact@unohomeloans.com.au 

You can also contact us through our online portal  https://unohomeloans.com.au/home-loans/#chat-with-expert

 

 

 

This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. uno can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender.

Add a Comment

You might also be interested in

Federal Government unveils HomeBuilder housing stimulus package

The Federal Government has revealed its new $688 million ‘Home Builder’ scheme. This scheme will see eligible owner-occupiers and first home buyers be able to apply for a one-off $25,000 cash grant from June 4 to December 31 to entice investment in the sector. Together with our team of expert brokers, we have broken down

Why brand loyalty will get you nowhere

If there’s one thing that frustrates me more and more the older I get, it’s money wasting. I’m talking about frittering away funds on things that can be avoided: overpaying on household bills, credit card late fees or paying for subscription services that you just don’t use.  The other thing that really erks me, partly

Should I get early access to my super?

If you are suffering financial hardship as a result of the coronavirus pandemic you are allowed to withdraw $10,000 before June 30 and another $10,000 between July 1 and September 24 out of your superannuation account to help you through the hard times. The temporary early access is one of several assistance measures aimed at

Search.
Compare.
Settle.
Strut.

Get started

Analyse my home loan

Analyse