At the height of the pandemic, as Australia went through the lockdown of people and certain businesses and industries, with the associated subsequent economic hardships, a significant proportion of the Australian population chose to defer all or part of their mortgage payments. This reached 11% of existing home loans according to APRA.
Most deferrals were for a period of 3 months. The first wave of deferrals ends at the end of September. Many homeowners will already have decided what they are doing now that the deferral period is over. Others may still be deciding what the best option is for them.
If you are coming to the end of your deferral period but you have not yet made your decision, this article contains some general information on the options available to you. This advice doesn’t take into account your individual circumstances.
Here are some of the options available to you:
Start making repayments again – The easiest option is to start making mortgage repayments again, especially if you are in a position to do so. If you can afford to make repayments at the previous level, pre-deferral, then you might want to start making these repayments.
Extend your loan term and reduce payments – If you would struggle to make repayments at the same level you were able to prior to the pandemic, but you are in a position to make a regular repayment, you could negotiate with your current provider an extension of your loan term. This would lower your regular repayment level.
Negotiate a further deferral or other hardship arrangements – If your personal situation is still fraught and you would struggle to make repayments. You need to speak to your lender. If you are in a business that is still locked down but you are likely to be able to reopen and scale post-pandemic, your lender may allow you to further extend your deferrals. If that is not an option you need to speak to your lender about other hardship arrangements.
Refinance your mortgage – Lenders are looking for more clients. They are offering extremely competitive rates and other incentives to those who may be interested in changing lenders. You might be interested in assessing your options and looking at a different lender.
Change your loan product – If you don’t want to, or can’t, change lenders you may still want to look at changing your loan product. If you are on a variable loan you might want to fix your interest rate. If you are paying principal and interest you might want to change to a period of interest only repayments. This can fix or lower your repayments making future budgeting easier.
Sell your property – The last option you may want or need to consider is selling your property. It may be in your best interests to sell your property and move to a more affordable area. Or, if moving to a more affordable area isn’t an option you may want to consider renting for a while.
If you are coming to the end of a mortgage deferral period you have a number of options available to you. If, as part of your decision making process, you want to check your loan product options, please get in touch today for a no obligation chat about your options. We would love to go more into details about some of these options. Get in touch today to discuss your needs.