I think the Government has done an amazing job responding to COVID-19 and the economic impact. Packages like JobKeeper, JobSeeker, small business loans and cash flow support for businesses have had a positive impact on many peoples lives.

The Australian Government have also provided banks and lenders with funding lines and guarantees to make these packages available to customers as soon as possible.

If you have lost your income and cannot meet your loan commitments deferring your mortgage repayments may be your only option.

How does it work?

The bank will defer your repayments for the next 3-6 months. This doesn’t mean they stop charging you interest, it means they just stop the repayments. The bank will still charge you interest on the loan during the deferred period and add the interest to your outstanding balance. Effectively, you will see your home loan balance increase as they add the interest onto your loan.

What happens after 3-6 months?

The bank will then work out the total interest that accrued during the deferred period and split it up over the remaining loan repayments. Below is an example calculation.

Current Repayment $1,800

Defer for 6 months $1,800 x 6 = $10,800

Remaining term 26 years (26 years x 12 monthly repayments): 312 repayments remaining

Deferred payments split in 312 repayments $34.61

New monthly repayment after deferral $1,834.61 ($1,800 + $34.61)

How can I apply?

Most of the banks have the option to apply on their website or via your internet banking. Check your bank’s website for more information. As always, if you get stuck you can always call us.

Do I need to provide proof?

Most of the banks will not ask for proof as they know that the Government restrictions have affected many industries. However, they will ask for an explanation of how COVID-19 has affected you. Some banks are automatically approving the application, and some lenders are still assessing each application.

Will this affect my credit file?

No, deferring your loan repayments because of COVID-19 will not affect your credit score provided your repayments were all up to date prior to COVID-19.

Deferring your repayments may be your only option at the moment and it’s a great initiative to relieve the stress of trying meet your financial commitments whilst not having an income. I do recommend to maintain your regular repayments if you haven’t been affected.

Have patience. All things are difficult before they become easy. Saadi

Thank you for reading