Your mortgage instalments are required to be paid in regular instalments as detailed in your Loan Agreement.
If you find yourself unable to meet these payments because you have lost your job, this could be considered a situation of Financial Hardship, and it’s important to talk to your Bank to explain the circumstances and to discuss your options.
If you review your copy of your loan agreement, you will find details about Financial Hardship in the Terms and Conditions.
What are the options?
You may have heard the term “Loan Repayment Holiday” or “Payment holiday”. This is where the Bank may agree to suspend your loan interest and principal repayments for a period of time, usually 3 months.
With COVID-19 and the nationwide shutdown, the Government has announced that they have come to an agreement with Banks to consider provision of up to 6 months loan repayment holiday to qualifying customers.
How do you apply for a Loan Holiday due to Financial Hardship?
To request this, all parties to the loan would apply to your Bank by completing a Financial Hardship application and providing 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 decide whether your application was justifiable, and if approved, they would suspend your full loan repayment including interest and principal for a period of time
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 are still liable for these payments, but at a later date. Your loan balance will stay the same, and the Interest that accrues will still be added onto the loan (usually monthly). So what you will see is your loan balance growing during the “holiday” period.
Your options once you are back in work, or able to start your repayment again, is to either make up the payments, or alternatively, you can ask for a recalculation of payments which means your loan monthly instalment is slightly higher to meet your original loan repayment end date. Or, the Bank may agree to extend the term of the loan.
If you need any assistance with this please contact a Financial Advice NZ adviser on https://financialadvice.nz/find-an-adviser/