I've been stood down without pay.
What is the collective wisdom's opinion on the Mortgage Holiday/Pause?
Even if one can afford to pay for a couple of months, should one press that pause button and conserve cash ?
Or should one continue to pay the mortgage and run down savings.
Wanting to understand the pros and cons.
Cons : Interest capitalised
Pros : Conserve cash
Interest being capitalised is honestly a small/moot issue considering you'll be saving exactly that same amount in cash so long as you don't spend it.
I don't see it as a CON in the slightest.
Its like suggesting fabric burn as a con for wearing a seatbelt in an accident.
Pause.
Just pay extra when good times return.
What does interest capitalised mean? Say you have a 30 year loan you pause for 6 months and then the interest just gets spread equally over the remaining term of the loan being 29 years and 6 months? Meaning you will have a slightly higher repayment for the remaining 29 years and 6 months? I myself may be in your situation soon enough, good to be informed on the options. Whilst not understanding the mechanics, I would much rather have money in the pocket than in someone elses.
You've basically got the gist of it.
Bear in mind that you'll pay interest on the extra interest so will end up paying more overall if you pause than if you don't.
Of course, this is a much better outcome than losing you home and interest rates are low so it's not a big charge.
(read your specific details, this is not financial advise)
That's not exactly how it worked for me when I had to do this about 18 months ago due to being out of a job. My mortgage was put on hold for 4 months., until I found a new job. Then I had to work out a payment plan with the bank, where I would pay back the extra I owe over a 12 month period.
Bear in mind that it's not just the interest you pay back, but also the monthly repayments that were paused. The term of the mortgage is not extended by the pause time. Once I started working I was paying (from memory) about an extra $200 a f/n for 12 months.
Doing it certainly helped my and my family, as all our savings were drained during my period of unemployment.
Did this affect your credit rating? I'm hitting myself as I just purchased my first home 3 months ago and have completely drained my cash into that. Not a good time right now.
No it didn't. Because I started making payments once I started earning again, it was OK. What it did affect was my lifestyle for 12 months. That extra money go out every fortnight was tough!
what if you are on a fixed rate mine is 3.75 with 1 year remaining. do u think they might wave the fees to change to a new lower fixed rate?
No chance.
Depends on your financial situation, dont do it unless you need the cash flow.
ie if you have 3-6 months worth of savings that will cover your expenditures and the mortgage i would not do it.
Genuine question - what's the upside?
The interest will be capitalized which means you will pay more over the long term, if you can afford it now, pay it, otherwise defer and pay more later.
Pause. Let the bank take the short term hit. They'll barely flinch.
Without clarity on when you'll have income again, I'd pause sooner rather than later.
Mortgage interest rates are the cheapest loan you'll get. You can always make extra repayments when you get your job back if you have excess cash then.
if you have a redraw account and then keep making payments it can make more cash available for future issues right?
Start the process now cause there is a bit of a delay in banks getting back to you.
Agreed. When it happened to me I didn't apply straight away, as I was confident I would get a job quickly (that confidence was misplaced). My bank also questioned EVERYTHING I had that was outgoing, even down to my Netflix subscription, to determine if it was necessary.
Check with your bank if pausing the loan will put a black mark on your credit history. This has been the case in the past when banks offer to put people onto "loan holidays" for medical reasons.
You will only be able to pause mortgage payments if you are in financial hardship, so the question will answer itself. You will be in a worse financial situation later if you pause mortgage payments now, unless you're skilled enough to make a profit with that money.
I’m with Westpac. Is it just a quick form or do they want/go thru all my expenses?
I think cash is king for the moment. I'd try keep as much as possible…
Not financial advice, do your own research.