With intermittent lockdowns threatening many people’s employment and finances, there has been an increase in mortgage stress. When experiencing mortgage stress, it may be helpful to discuss this with your lender, as more often than not, they will have some systems in place for you to put your loan repayment back on track. Our property and finance experts weigh in on banks and mortgage support below.
What is Mortgage Stress?
Mortgage stress is when you end up paying more than 30% of your weekly income into your mortgage repayments. After this 30% amount is reached, it makes it difficult for people to save and cover weekly expenses. This can lead to mental health issues for yourself and those who are dependant on your income. With this increased period of mortgage stress, banks are looking to provide assistance, with Australian Banking Association Chairman, Anna Bligh, stating “Customers can rest assured that if they need help, they will get it.”
Many banks offer loan deferrals for those experiencing mortgage stress during this COVID period. Commonwealth Bank is offering a 2-month payment deferral, with the other big four banks offering similar options. Whilst a loan deferral can be key if you need temporary relief, it may not be the best option for support. It is best to speak with your mortgage broker if you are looking at arranging a loan deferral to see if it is right for you.
Reduced Repayments or Redrawing
Banks also offer the opportunity for reduced repayments or redraw facilities. Redraw facility means that you can pull out money that you have already paid on your loan. This can help you if you’re in a credit crunch and a large unavoidable expense comes up, like car troubles or a medical issue. Once again, these options may or may not be the best for you, so get in touch with a mortgage broker to work it out.
Banks may also offer the option for you to hold off repaying the principal amount of your loan, and instead only repaying interest. This is a good way to reduce your outgoing mortgage repayment expenses temporarily, with an interest-only period being significantly cheaper.
Us at Vision hope you stay safe over this COVID period and that you can keep on top of your repaymets. If you need to take up any banks and mortgage support, please get in contat with us here.