It’s alright to be concerned during this time as we’re all experiencing a financial and emotional upheaval never-before-seen in the modern world. But it is important that you don’t allow the concern to become debilitating which can be harmful to your long-term health. The key here is to try to look ahead and the way to do this is to consider your financials as well as your own wellbeing. To get started, here are a few quick tips for hardship and repayment relief that can help get you through the effects of the COVID-19 pandemic.
NOTE: Before you take any of the actions below, we recommend you speak to a mortgage specialist ie your mortgage broker, before you speak directly to the lending institution. They will guide you on the best way to approach the lending institution to ensure the best outcome.
- Clearly Indicate What The Relief Need Is For
When you’re filing for a payment relief application, be sure that you have outlined the reason for your hardship and need of assistance i.e. COVID-19. This indication needs to be made in writing preferably so that there is a record of it, not to mention, it cuts off the need for back and forth questions and answers. This is essential as the lender needs to be aware that the pandemic has impacted your ability to pay your debts.
- Consider The Time That You’ll Need
Payment relief typically offers applicants the option to defer repayments for three months, however, there are some lenders that offer up to six months. This is important to know if you think that three months isn’t enough and you need to look elsewhere to those who offer six months.
- Know Your Interest
It’s good to know exactly what you’re getting into with this application. Yes, it is true that with payment relief you won’t need to repay any debts during the period of time, however, there is interest that is calculated on your current loan balance and added to your loan balance and compounded each month.
- There Will Be A Marginal Repayment Increase
Once the payment relief has run its course and it’s time to continue with repayments, your debt will very likely be recalculated based on your loan balance along with the interest calculated according to the remaining loan term. This will mean a marginal repayment increase compared to before your application for payment relief.
- Having All The Information
For your memory bank, seeking payment relief due to COVID-19 may be recorded on your mortgage profile, however, word on the street is that it won’t adversely affect your future loans. It seems that in the future, a more thorough credit analysis by that same lender may be adopted. Ensure you have clear records of all of your applications.
- Bank Statements Reflect The Relief
There will be a reflection of the payment relief on your financial records i.e. your banking statements. This just means that if you are ever looking to be refinanced by another lender, due to the current policies in place, the new lender will want to see your repayment history for six months after the payment relief period.
The biggest tip of all is trying to hold off from seeking payment relief until it’s your only option. This is because there have been many clues that the economy will get worse before it gets better. You may need the relief more later so hold on for as long as you can.
For the interim here are a few other options:
- Consider switching to an interest-only loan for around 12 months or so. This isn’t a policy, but it is true that under hardship, you can refinance interest-only loans at any time.
- If you have other loans or credit card debt, it would be prudent to pay those and put your mortgage on one of the relief programs being offered.
- If you have a redraw facility with your financial institution, consider using this to make your loan repayments.
Bonus Tip: Take Care Of Yourself
This is undoubtably a stressful time but that doesn’t mean that it’s impossible to endure. There are ways to manage your stress and here are some of the best:
- Use the stress to motivate rather than intimidate.
- Use it to meet your daily challenges and goals.
- Increase your efficiency.
- Take a breath. Stressors damage your mental and physical health so take it easy.
- Practise self-care and relaxation.
- Manage your response to stressful situations.
- Remember that not all stress is bad! Stress pushes us to do things we didn’t think we were able to do. It is how we learn to deal with that stress which is necessary to master during times like we are experiencing.
At Invest Hibbards, we are here to support you and are equipped to offer assistance in all areas that you could need help with. Check out our site today if you’re interested in more great tips and tricks during this turbulent time.