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Here’s a quick peek into what you can expect during and after a COVID mortgage holiday along with some other alternatives you could explore.
While there is a lot of talk around COVID mortgage holiday, there are finer nuances that are still not well known due to the significant focus on the immediate financial respite it offers. Here’s a quick peek into what you can expect during and after a COVID mortgage holiday along with some other alternatives you could explore.
During a COVID Mortgage holiday
- Eligibility: To be eligible for the holiday a borrower needs to have suffered COVID caused hardship due to loss or decline in income
- Duration: Lenders are offering a 3-month and 6-month holiday periods. Borrowers can go with either or begin with the 3-month option and then ask for an extension based on financial circumstances at the end of the 3 months.
- Flexibility: If a borrower has applied for a COVID holiday, he/she loses the flexibility to make payments during the holiday period. Repayments can be resumed after the holiday period ends.
- Credit Score: Be sure to apply for a mortgage holiday before discontinuing repayments. A repayment default before opting for the mortgage holiday could severely affect your credit score making it difficult or substantially more expensive to gain access to funds in the future
Get it right from the start with professional help.
After a COVID Mortgage holiday
A mortgage holiday will increase the cost of your loan as interest capitalises during the holiday period. You will either need to increase your repayment amounts, extend your loan tenure or opt for a combination of the two. In all cases, the cost of your loan will increase.
Other options you could explore
If you have been severely impacted by COVID and are not confident of future income, stick with your current lender and apply for relief immediately without missing a repayment. If you are however in a situation where you are just about meeting repayment requirements but are looking at savings on your home loan here’s what you could consider:
- Interest-only repayment options: A lot of lenders are allowing borrowers to switch to interest-only repayments for a fixed duration. This could help you reduce repayment amounts without increasing the cost of your loan as much as a mortgage holiday.
- Refinancing: If your home loan is over two years old, chances are your rate is not competitive. Compare your mortgage rate to what is the market is offering. Even a small dip in your interest rate could reduce your payment size substantially instantly adding funds to your monthly budget.
It’s best to seek professional advice to understand which option works best for you. If you are in dire straits, opting for a mortgage holiday at the earliest is crucial. Reach out to us for the perfect fit as per your circumstances.