Many of you will be worried about how to manage your mortgage payments during the lockdown, especially if your employment, or your partners employment have been impacted.
If you already have a Financial Adviser, they should be very familiar with your financial situation. Give them a call to go over your current financial challenges and discuss your personalized options.
As part of Covid19 Financial Package announced by the Government, there are provisions for those who are impacted.
What is the Government Policy regarding Mortgage Payment Holiday Scheme?
New Zealand’s retail banks are offering to defer repayments for all residential mortgages for up to 6 months for customers financially affected by COVID-19.
Mortgage repayment deferrals mean that affected customers who apply to their bank will not make principal and interest payments on their loans for up to 6 months. This package is in addition to what banks are already doing individually to provide assistance to affected customers.
Key details of this scheme:
- It’s important to know that interest on these loans will still accrue, and deferred interest will be added to the principal amount of the loan.
- Banks will assess the suitability for each customer who is asking for a deferral.
- Banks will have different approaches to how they manage the process for customers to opt into a mortgage deferral. Those details, including eligibility criteria, will be available on bank websites.
- Customers should contact their bank or financial adviser for further details or queries about the scheme.
How do you apply for the Mortgage Payment Holiday Scheme?
Please contact your Bank as policies and processes differ across lenders. You may need to complete a Financial Hardship application, or any other documentation required by your Bank. If you have a joint loan, both of you will need to sign to request this, and you may be required to provide evidence of the reason why you couldn’t meet your repayments, such as a letter from your employer stating you why you are no longer working.
The Bank would then make their decision, and if approved, they would make the changes agreed to your loan repayments for a period of up to 6 months.
How does a Loan Repayment Holiday work?
A loan repayment holiday does not mean that the payments are paid by someone else or absorbed by the Bank, you still owe the money, and the payments, will need to be covered at some stage. If your repayments are suspended for a time, your loan principal amount will stay the same, but the Interest that accrues will still be added onto the loan (usually monthly), so you will see your loan balance growing during the “holiday” period due to interest charges.
If you are able to resume work before the end of the approved “repayment holiday” term, and your repayments are now affordable, or you are no longer in Financial Hardship, its important to resume making payments as soon as you practically can.
How do you repay the instalments and interest?
Once you are back in work, or able to afford your repayments again, your options could include:
- Make up the payments by making higher instalments for a period of time on floating loans
- Ask for a recalculation of payments which may mean the loan instalment stays the same, but the loan term is extended.
- If you loan has a fixed rate, extra payments may be limited or restricted, so you would need to clarify with your Bank.
- A debt consolidation may also be an option.
With debt, you have a legal obligation.
Your mortgage or personal loan / credit card instalments are required to be paid in regular instalments as detailed in your Loan / Credit Agreement. While we may be in a state of emergency, and if you are unable to meet all or some of your payments, it’s very important to talk to your Bank / Lender/ Financial Adviser as soon as possible, and before you go into payment arrears.
What other things could you do to manage your financial situation?
Our lives and priorities have changed virtually overnight, and it would be sensible to review your finances by:
- Creating a “lockdown” budget
- Review what funds you have in savings accounts
- Add in your income such as wage subsidy, redundancy payments, or any other income available.
- Work out your expenses over the lockdown period and see if there is a shortfall.
- Review your expenses, are they needed?, or can you cut back, suspend or cancel?
- Prioritize the most important expenses
- Talk to anyone you owe money too if you think you may have a problem making payments.
This is a time when luxuries may not be affordable, and your focus will most likely be on the basics needed to get through. This will differ across households.
What other information might be useful for you?
https://www.nzba.org.nz/consumer-information/smarter-banking/financial-hardship-bank-can-help/
https://sorted.org.nz/must-reads/covid-19-and-your-money-7-things-to-do-right-now/
Where can you find a Financial Advisor?
In these uncertain and challenging times caused by COVID-19, good quality financial advice is more important than ever. If you want to talk to a quality financial adviser, reach out to a Financial Advice NZ member today. https://financialadvice.nz/find-an-adviser/
