Deferring Your Home Loan Repayments

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Updated: July 22, 2020

Banks have offered a repayment holiday for their loans, but there may be a sting in the tail that borrowers should consider.

The repayments and the interest incurred on those deferred repayments will not simply go away, but will be added to the loan and the term will be extended as long as the loan doesn’t go over 30 years. This means that you may end up paying interest on the interest of the deferred repayments.

At this stage, CBA is the only bank that has announced it will offset the interest costs that will accrue for customers who have been granted the deferral on their home loan repayments due to the pandemic

The Big Four Banks’ Policies:

CBA – Following the end of the six-month pause, home loan repayments remain the same as before, with the loan term being extended. CBA will also make a one-time payment to offset the interest on interest being charged to customers over the deferral.

Westpac – Affected customers are being offered a three-month pause with the option for a further three-month pause on a case by case basis. Home loan repayments increase after the deferral, but the loan term remains the same.

NAB – Following the repayment holiday, home loan repayments increase, but the loan term remains the same.

ANZ – Customers can choose to keep the loan term the same or extend it by six months, with interest capitalised, likely resulting in mortgage repayments increasing after the pause.

What It Means For Consumers

The impact to some borrowers could be essentially an increase on the amount they need to repay if they don’t make extra payments after the pause expires Obviously, if borrowers have lost their jobs or their income and are unable to meet their obligations, the repayment holiday is a welcome relief.

There are other options available which include negotiating a rate reduction or reduced repayments for a period of time, but borrowers should consult with the expert finance team at Chocolate Money for a full review of their loans, their options and tailored credit advice.

Contact Chocolate Money on (03) 8673 0307 or a review and explanation as to what options are available.