If you’ve lost your job, or had your income effected due to the COVID-19 pandemic, you might be feeling unsure about what to do about your mortgage or your loan application. Should you put your repayments on hold? Are there and other options available to you? Maybe you had a pre-approval in the works, but now you’re worried the lender might pull the rug out from under you. Or maybe you’re just keen to get yourself in the best financial position possible as we ride this out. Whatever the case may be, a good mortgage broker is a really good bet right now.
It’s our job to stay up to date with what the lenders are doing, and we receive daily updates on policy changes and incentives. We’re also here to help you navigate the situation as a big picture, and we’ll help to guide you through a number of scenarios in order to find a tailored solution.
What to do if your income has been impacted
Before you go ahead and take up the offer of temporarily pausing your mortgage repayments, we strongly encourage you to be fully cognisant of the terms and conditions. The general advice is to keep up your repayments as long as you can. Communicate with your bank often and early (bearing in mind that the Big 4 are currently overwhelmed with people seeking hardship packages.) Only use this option if there is no other course of action.
We can take you through various other options which might be a better fit for your situation and avoid the implications that a repayment holiday may bring. You may be able to simply switch to the minimus payment, revert to interest only (if you are paying principal and interest), or consolidate your debts in to the one payment. You may also be able to dip into your savings to help cover your loan, or use redraw payments.
If no of those options are suitable and it turns out that your best bet is to in fact pause repayments, most banks are offering 3 or 6 month repayment free periods during which your interest will be capitalised. That means that the interest you didn’t pay during the repayment holiday will be added on to your loan balance.
Should you refinance?
Again, there are always a number of factors to consider when this question pops up, but it is always worth having the discussion, especially if you haven’t refinanced for a while. If you’ve been impacted by redundancy, job loss or a decrease in overall income, it may be best to work with your current lender as opposed to trying to find a new one. Chances are there will be a solution, but if not, we can help you look for alternatives.
If your job or income hasn’t been effected, then it is definitely worth a look at refinancing as rates are at historic lows and we are adept at maximising the savings for our clients.
Should you fix now?
To fix or not to fix? It’s a question we are asked a lot. At the moment, fixed interest rates are incredibly low, and with the cost of lending creeping up, it may be the case that we start to see fixed rates start to rise as well. As always, there are pro’s and con’s for fixing your interest rate and all should be carefully measured against your unique situation and requirements. If you enjoy the security of knowing what your repayments will be every month, then fixing could be an option. It really depends what your objectives are, but it’s definitely worth having the chat with us if it’s something you’d like to explore more.
Can you still get a home loan?
If you’ve lost your job, or work in an industry that has been hit by this crisis, there will absolutely be a red flag for the bank, and it may be difficult or harder to obtain finance. With no source of income, you are unfortunately unlikely to secure finance at all. If you are down from two incomes to one, there may be a chance and we can help you look into this. While the banks continue to lend as per pre Covid-19, they are certainly starting to take a more conservative approach to those in higher risk categories with a higher loan-to-value ratio e.g. above 80%. However, they remain fiercely competitive for high quality borrowers and the current variable interest rates reflect this.
An important thing to note, is that if you are not yet ready to buy, but are in camp “wait and see” we strongly encourage you to get in touch and get the ball rolling with paperwork and a pre-approval so that you can be ready to make your move when the fog lifts and the time is right. On the other hand, you may feel that the right time is now – there are still plenty of properties on the market and there are still active buyers.
Ultimately, the COVID-19 crisis may be effecting you a lot, and conversely it may be having little impact on you at all. In saying that, there is plenty of opportunity for everyone to do their best out of this financially, whether that be simply doing what you have to do to scrape by, consolidating your debt, or maybe refinancing to take advantage of a lower rate. Whatever it is, a broker is worth their weight in gold when trying to navigate the multitude of options available to you.
We’re here and we are ready to assist so get in touch.
All lending subject to status and lenders criteria. Terms & conditions apply. This document contains general information only. Your own personal circumstances have not been considered and you should seek independent financial advice prior to making any decision on a financial product.