Bank support: Loan term extension and Interest Only, etc

Discussion in 'Loans & Mortgage Brokers' started by Hebro, 26th Mar, 2020.

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  1. Hebro

    Hebro Member

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    We have no adverse impacts yet - tenants still paying. Interest rates good. LVR low. Buffers good. Other assets. But my scenario planning did not include pandemics, of indeterminate length.

    Longer term who knows what is going to happen, to property prices, tenants, the world?

    What is the best support to ask from your bank if capitalised mortgage holidays are not needed and wouldn't really help much?

    - return some loans to interest only - for cashflow
    - extend the loan term - again for cashflow

    Anything else? Best to ask now or to wait until they further develop support policies?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Banks will not allow return to IO without a reassessment, same with extending the loan.

    There are no concessions in this area. Might be worthwhile doing though, if you qualify
     
  3. Darwin55

    Darwin55 Well-Known Member

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    What about banks halting mortgage repayments for up to six months?

    Once this starts what will people decide to do?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Once it finishes they will need to consider whether the extra interest can be deducted and how to make the larger repayments on their loans.
     
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  5. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    Just remember that the banks are not forgiving the loan repayments - they still need to be repaid + interest. Only use it if you have to.
    It is only designed for borrowers in distress. The majority of people (me included) won't be in distress - so feel free to do nothing............and carry on regardless.
     
  6. mrdobalina

    mrdobalina Well-Known Member

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    To request the 6 month loan repayment deferment, do you have to demonstrate financial distress, or are they allowing anyone to do it?
     
  7. Lindsay_W

    Lindsay_W Well-Known Member

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    Each lender has different criteria
    Some lenders you need to show you've had a significant drop in income/job loss due to covid-19
    Some will allow 6 months straight off the bat, others you get 3 months, then reviewed for an extension of another 3 months.
    Don't forget, the interest during the repayment holiday will be capitalised onto the loan so it's not free.
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Depends on the bank, AMP says everyone is effected so any borrow can ask
     
  9. mrdobalina

    mrdobalina Well-Known Member

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    How about CBA and Bankwest?
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    best to ask your broker, I have received emails about these but don't know off the top of my head
     
  11. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    I only have info on the big 4, quoted from 7 news:
    NAB is immediately offering a six-month repayment holiday, as is Commbank.
    ANZ is introducing a six-month pause, reviewable after three months, while Westpac is bringing in a three-month pause which is extendable to six for those who have lost their jobs.
     
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  12. Beano

    Beano Well-Known Member

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    What about banks allowing unlimited mortgage repayments for up to six months?

    (I have some fixed mortgages at a interest rate I now consider high It will save me a fortune to get rid of these)
    Don't forget, by paying off the loan with the high interest during a open repayment period will be just like getting away with no break fee!

    These extra payments can re -lent out.
     
    Last edited: 26th Mar, 2020
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  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    on this see
    Tax Tip 280: Loan Repayment Holidays and Tax Deductibility Tax Tip 280: Loan Repayment Holidays and Tax Deductibility
     
  14. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    The 6 months thing solves the immediate issue due to job-losses etc specifically for the C-19. It's the general expectation that people will start working again around the 6 month mark.

    Once that's done, though, it's going to take a bit for the general property market to recover - valuations will be all over the place - probably no sales during the previous period to compare too - and there may be lenders with securities on their books that people can't refinance, ad also can't pay in the event the back-to-work scenario doesn't go as hoped.

    In that case, it'll be interesting to see how much the banks will negotiate on terms - IO terms, extending loan terms and so forth for existing borrowers.

    For existing borrowers who are struggling, it makes more sense to re-contract regardless of LVR to help borrowers maintain payments long term.

    It's going to depend a lot on what things look like in a few months.
     
  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Makes sense but about 1 in 5 of ours are practising " stop and drop" crisis management

    ta

    rolf
     
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  16. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    IMO valuations are about to see impacts. Crisis valuations will assume worse than realistic. Short term liquidity may stop like in the early GFC

    I remember April 2008 and there was no credit. bad Val's and flight to quality. Investors can assume a credit squeeze and it willkill those who want Refi. Io. Equity. Won't be nice.. Next week on lenders will b tighter than a fish as policy softly rolls out. Not announced.
     
    Last edited: 27th Mar, 2020
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    No full valuations now all seem to be kerbside, so that it itself should affect things.
     
  18. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Already seeing full vals roll back , not due to data but valuer sentiment. Data looks back, sentiment looks forward.

    We have been locknutting equity like crazy for clients that are responsive to the times, rather than reactionary to the times.

    Having been doing this for 21 years, it aint my first rodeo :)

    This too will pass (might hurt as much as passing a kidney stone) but those that prepare will flourish, those that dont................some will hold ground, many will wither purely due to fear driven programs.

    We had dozens of clients Post GFC that did extremely well once the equities markets settled.

    CBA at 28 bucks .....................

    ta
    rolf
     
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