Deferring mortgage payments due to COVID-19

Discussion in 'Investment Strategy' started by albanga, 27th Mar, 2020.

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  1. albanga

    albanga Well-Known Member

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    I know this is going to be a taboo subject but Iets discuss it anyway.

    As I understand it banks are not requesting evidence for deferring mortgage repayments.

    So do you believe it could make sense as a strategy to defer repayments even if you are still gainfully employed.

    Two reasons being:
    1 - You could lose your job any minute. So the earlier you defer means the more you can have available in savings to see you through.
    2 - Once this is all over if you didn’t lose your job then you could have considerable savings to use for opportunities particularly in the share market.

    Discuss
     
  2. Hetty

    Hetty Well-Known Member

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    Interest is capitalised though, still have to pay it and at these low rates I’m keen to keep paying it off, would only freeze if I had to.
     
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    why taboo?

    Sounds like a good approach as long as people understand it is interest on interest. But if you store cash in the offset account attached to the loan on the holiday there should be no extra interest incurred.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Pro -if you can save it, and don't lose your job, great.

    Pro - might be deductible if INV?
    Con - use it too soon, lose your job, didn't save enough - WAY more pain, and HIGHER mortgage payments.
    Con - If you're doing it on PPOR, more non-deductible interest.
     
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  5. wilso8948

    wilso8948 Well-Known Member

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    @albanga thanks for starting a thread on a topic I was too nervous to ask. Feel as if I am missing something.

    *hits "watch thread" button
     
  6. wilso8948

    wilso8948 Well-Known Member

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    Am I correct in saying CBA just extends loan term so payments remain constant? Interest is still capitalised.

    Banks putting mortgage payments on hold amid coronavirus
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  8. wilso8948

    wilso8948 Well-Known Member

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    Is it only for OO loans at this stage?
     
  9. wylie

    wylie Moderator Staff Member

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    "Capping the interest" meaning capitalising or actually capping the interest?
     
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  10. Joynz

    Joynz Well-Known Member

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    Isn’t it fraud?
     
  11. The Y-man

    The Y-man Moderator Staff Member

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    As a shareholder of major and minor banks - whose dividends help pay my interest by the way! o_O - I see no problem as long as the banks make more money in the long run (wait, that sounds completely evil....).

    Capitalising interest would be one way, but I also can't really (as a shareholder) see an issue with repayments going to IO for a time ~ because that means profits still keep rolling in (and thereby funding my divs) at the same time easing of cash flow issues for borrowers (believe me I know this side of the ledger too!!)

    The Y-man
     
  12. The Y-man

    The Y-man Moderator Staff Member

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    Not if the bank(s) put out a general "everyone is welcome to adjust the repayments" (because in the end it will make use more money) type message IMHO

    The Y-man
     
  13. mrdobalina

    mrdobalina Well-Known Member

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    Was thinking of doing this to provide more funds to invest in the share market on the rebound.
     
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  14. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Sorry - capitalising.
     
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  15. Joynz

    Joynz Well-Known Member

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    But is that what they are saying?

    Isn’t the intent to help those who are affected by COVID-19. In other words, job loss, income drastically reduced etc so that you can’t afford payments.

    Not so you can make a profit by investing in the share market etc.
     
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Why would it be fraud?
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Nope, AMP specially indicated it is for all borrowers, including companies, trustees and SMSFs
     
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  18. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    All borrowers are affected according to AMP. no proof needed.
     
  19. Scott No Mates

    Scott No Mates Well-Known Member

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    I received this from a broking group earlier today:

    "We are very fortunate that banks are offering financial assistance to those impacted by the COVID-19 virus crisis. But what’s true and what’s not? We break it down for you here.

    Myth 1:
    Most borrowers can ask for a ‘mortgage holiday’ so they don’t have to make repayments on their home loan during the COVID-19 crisis.

    Fact 1:
    Deferral of mortgage repayments is only available for those who are facing significant financial hardship due to the impacts of the COVID-19 crisis and the measures to contain it. This typically means you need to have suffered a major change in circumstances such as job loss or the closure of your own business. You need to apply to your lender and they will determine whether you fit the criteria.


    Myth 2:
    If you can get a deferral on your loan repayments you should take it because it means you may not have to pay interest for up to six months.

    Fact 2:
    It is recommended you keep making your usual loan repayments if possible, since deferring your repayments increases the overall cost of your loan. This is because the interest you incur during the deferral period will be capitalised (i.e. added on to your mortgage), so you will need to either increase your interest repayments after the deferral period or extend your loan term; both of these will increase total interest. Additionally, any available redraw on your loan may be used first by your lender to make your repayments during the support period. Therefore, if you need access to this money during the support period, consider transferring it to another account now.


    Myth 3:
    If you are struggling to make loan repayments, or will struggle in the near future, you should just pay when you can as the banks are being more flexible.

    Fact 3:
    If you are struggling to make repayments or suspect that you soon will be, contact your lender ASAP to discuss how they can help you. If you go into arrears on your mortgage it will affect your credit rating and this may make it more difficult for you to apply for financial assistance later on.

    Feel free to share this email with all your friends and colleagues as you may not be aware of their situation. If need to, they should get in touch with their lender directly to arrange financial assistance."

    I take it that each finance house has formed it's own opinion and has their own policy and should be approached for your particular circumstances.
     
  20. Angel

    Angel Well-Known Member Premium Member

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    I dont see it as fraud. If the offer is available to take a repayment holiday,then why not? Women on maternity leave can do it. This is how people made it through the Great Depression.

    Let's say as LLs we keep our jobs and all goes well. But the tenants lose theirs and ask for rental holiday. I will be asking for mortgage relief if I have to (we have a small cash buffer).

    Last week I was getting excited with the rumour going around about accessing some of our Super. Not because I thought I would "need" it, but so I could buy shares or pay off our car loan. When the legislation was made known, I was disappointed about the terms of release being almost the same as before - only for centelink recipients or like that, not for everybody. There have always been "last resort before bankruptcy" solutions available for mortgage holders.
     
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