What You Can Benefit from the Banks: Relief During Lockdown.
The good news about the lockdown restrictions is that Australia’s banks have presented extra assistance to affected clients. CBA, the largest bank in the country, has stretched out its foreclosure moratorium. The bank won’t evict a client in arrears until at least February 2022.
Australian banks other assistance presented:
- Mortgage deferrals (the size and scale of the aid varies among banks)
- Loan-deferrals or small enterprises for up to three months (AN offers two months)
- There are refunds on merchant terminal fees for three months
- There’s a wave of term deposit notice periods and fees
CBA and Westpac extra support:
- No foreclosure until February 2022
- There is an automatic two-month mortgage deferral for clients in the severest hit locations and industries and others seriously affected by the lockdowns.
- For small business loans, there is a three-month deferral.
- Depending on a case-by-case basis, there are up to three months of mortgage deferral plus credit card and personal loan deferrals.
- Mortgage and credit card debt will have interest rate reductions
- There’s up to $15,000 free temporary overdraft for a max of 45 days to help with cash flow for business customers.
Home Loan Repayment Deferrals Real Cost
People taking benefit of this assistance of mortgage repayment postponements present only short-term relief but should be cautious of the long-term repercussions.
In a RateCity.com.au analysis presents a two-month pause on a $500,000 loan with 25 years remaining could have another $1,712 for the loan. That means you pay an additional $21 every month after the deferral closes. If the customer keeps their repayments the same after the deferral and lengthens out their long term, it could cost an additional $4,408 throughout the loan.
Sally Tindall, RateCity.com.au research director, claimed that a mortgage deferral is not free even when it can be beneficial during hard times.
Tindall added that regardless of what the bank presents to its customers, it’s best to find independent advice “from a financial adviser or a free financial counselor through the National Debt Helpline.” According to Tindall, the bank is not just presenting assistance. Most service sources device hardship policies. So, if you’re having difficulties, ask for help instead of just hoping that things get better. She also stated that to possibly prevent extra penalties, it’s crucial to talk through some possibilities before missing a bill.
The extra bill on a two-month pause on a $500,000 loan balance within 25 years.
Same loan term
Loan term extended
Extra paid over life of loan
Increase to repayment after pause
$21 / mth
Increase in loan term
Notes: People who are advance into their loan will pay less based on an owner-occupier shelling out principal and interest on the average rate of 2.69%.
Other Probable Options To Delaying Mortgage Repayments:
Redraw facility or use money in your offset.
Appeal for a rate cut: Flexible rate customers should request their bank for the new customer rate as a minimum. Other clients may shift to a lower fixed rate.
Paying something is better than nothing, so shift to part payments or interest-only repayments.
Tips For Reducing The Impact Of a Repayment Pause
- Make an effort to pay some of your loans during the deferral
- Also, make a shot at providing extra repayments to recover when the deferral ends
- Have free financial advice from The National Debt Hotline 1800 007 007