Pro Tip: If you are in danger of losing your job, or have lost your job due to COVID-19 and you have a home loan.
- Redraw on your loan asap so that you have some extra cash to help you get by with the necessities over the coming months. Keep it in your Offset Account if you have one.
- Many banks are offering to freeze loan repayments if your are out of work due to COVID-19.
NOTE: You can't redraw on your loan once it is frozen. Redraw first - Stay Safe
Mortgage Advice during COVID-19 Pandemic
barbarella on 28/03/2020 - 08:53
Comments
If you have an offset never pay more than you have to in your home loan for this very reason, along with tax advantages.
In stable times and when I cannot see opportunities, I still park the money in offset. It may not be a long term park but it's still significant money.
Think of the likelihood the property becomes investment in the future.
Reraws are essentially a new loan… And if u stick it in offset… U just contaminated it and make tax deductibility a pain to calculate.
Hi guys need advise please - I fixed my home loan with ANZ almost 1.5 years ago paying 3.75% P&I (I have another 6 months approx to finish off the fixed term).
Due to the COVID-19 situation ANZ are now offering a 2.19% p.a. 2 year fixed rate (4.00% p.a. comparison rate) but I have to contact them and apply for it…
2.19% fixed seems pretty good but compared to current 3.75%
The only thing I am bit confused about the 4% comparison rate, is it too high? Sorry I am a noob when it comes to homeloan jargons.
Please advise if I should apply?
You’ll need to pay a break fee, wait 6 months
Thanks for your response.
I am bit confused if I have to pay the break fee… This is what ANZ has put on their website
New Fixed Rate Home Loan option
We’ve introduced a 2.19% p.a. 2 year fixed rate(4.00% p.a. comparison rate) for owner occupiers paying principal and interest with the ANZ Breakfree Package (annual fee $395).You can apply for this rate from Monday 23 March 2020.
A fixed home loan is a contract that fixes you into certain T&Cs, including the interest rate. Applying for the new 2.19% is applying for a new and different product/contract, hence you would most likely have to pay a break fee.
There's a lot of info on fixed vs variable and comparison rates, explained for people with no background in finance, I suggest you read it.
@Ash-Say: Update: I was able to negotiate with ANZ where they charged me $2200 break fee but then also credited $800. I was able to do it because I did contact them on 20th March(2.19 went live on 23 March) but the call was automatically rejected, after I had entered CRN, stating they were busy. I was able to provide an evidence for this issue.
Still a reasonable outcome.
You were happy with that interest rate at the time. Don't worry about it too much. It's like when you buy something and then see it on sale later, there's no point crying over it. Besides, if interests rates went up, how would you feel? That's the point of going into fixed
Terrible advice. It is easier to spend and waste money sitting in a savings account than in a home loan account.
That's only relevant if you have no self control.
Just be mindful though. As we are aware the banks are blood sucking leeches and would never do anything for free. If you apply for financial hardship they will recapitlise your interest. So you will not only have to pay the original interest in the future, but your interest will compound on top of the unpaid interest, so you will pay more than you would have originally.
I.e. if you have to pay interest at 4% on 100k. That is 4k per year that they charge you. However if you recapitlise for 1 year you don't just pay the 4k for year one and then 4k for year 2. You have to pay 4% of 104k in year 2 which is 4160. So at the end of year 2 you owe 108.16k. Then this continues year by year and is called compounding.
It doesn't sound like much, but for a family in hardship on a 800k loan we are talking huge dollars.
Remember when the Scomo talks on TV and says that the banks are helping us out, most likely they have lined his pockets with cash and they are in fact profiting on our misfortune. Banks will never help Australians.
Careful of bank bail-in laws - you could have your money 'converted' to a obscure type of bank shares to save the failing bank.
Government guarantee only covers you if a bank actually fails - a bail-in, as above, will happen first, and is much more likely.
My money feels safer in the home loan, even if frozen.
KEep in mind it does become a taxable
liabilityevent if you withdraw it out of your home loan. I had to discuss with my accountant prior to doing so and he confirmed this. There's more flexibility to always keep it as liquid in your offset - does the same thing.edit: sorry, taxable event. Not necessarily a liability depending how you structure it, consult with your accountant or financial advisor beforehand.
Haha. Good advice. I shall do that now.