As you’ve probably seen on the news or heard from a friend or family member, banks are now providing relief options for those that have been affected by Covid-19.
Most banks are now providing a mortgage holiday of up to 6 months for their customers however the 6 month payment holiday is not interest free. Interest will be accrued and capitalised throughout this time frame.
For example if your mortgage is $500,000, at 4% interest accrued across 6 months is $10,000. If you opt in for a repayment holiday then at the end of the 6 month period your mortgage will now increase to $510,000 + any interest charged on monthly interest accrued
Another option the banks are offering based on eligibility is to go interest only for up to a maximum of 12 months. This means you will only be paying the interest portion of your loan and no principal across this timeframe.
For example if your mortgage is $500,000 at 4% interest accrued across 6 months is $10,000. Opting for interest only will mean by the end of the 6 month time period your loan will still be $500,000.
If cashflow is important to you the weekly repayment amounts on a mortgage of $500,000 interest only vs P&I on 30 years would be $384 vs $550.
If you are thinking about any of these options and have been affected by Covid-19 please reach out as soon as possible. There is a huge backlog growing at all major banks as they’ve been flooded with requests.
Stay safe and be kind to each other