For many Australian homeowners financially impacted by COVID-19, pushing pause on mortgage repayments has been a helpful option. For others, extending their loan term or reducing repayments has provided some much-needed financial and personal relief. But as we start to see an improvement in the current situation – and some definite “light at the end of the tunnel” – now is a great time to reassess your financial situation and put in place some plans to get back on track financially.
The impact of a loan repayment break
In a recent article **, Financial Wizard Noel Whittaker reminded homeowners of the long-term importance in continuing - and even getting ahead if possible – their loan repayments in these uncertain times.
He writes, “For years I have urged borrowers to get ahead in their loan repayments, not only to provide a safety buffer if interest rates rise or they suffer financial stress, but also to save a fortune in interest.”
Whittaker highlights that, although offers to defer mortgage repayments may seem attractive, unless you have no alternative, avoid going down this route as it simply results in lenders collecting interest on top of interest.
He also points to the irresponsibility of some lenders – like the bank that emailed its customers advising it would be changing home loan direct debit repayments to the current minimum required payment, with customers having to opt-out should they wish to continue with their higher existing repayments - and urges homeowners to remain vigilant with a clear understanding of how a loan repayment break or reduction could impact you in the long-term.
Looking ahead to your financial future
Globally and here in Australia, there is planning under way for a world beyond the pandemic. Already, with more Australians back at work, we’re starting to see an improvement in the current financial environment.
Prime Minister Scott Morrison summed it up really well with this comment, “This health crisis and economic crisis is a battle on two fronts, and it is going to be waged in an unimaginable and unprecedented way over the next at least six months and potentially beyond that.”
If you have made recent changes to your mortgage repayments, it’s important you have a conversation with your lender or your mortgage broker about getting your finances back on track. Please get in touch if you need financial advice both now and into the year ahead to help you plan for a more secure financial future beyond COVID-19. The team at Mortgage Express is here to help.
** Reference:
https://www.smh.com.au/money/borrowing/why-lenders-don-t-mind-if-you-cut-your-mortgage-payments-20200420-p54le8.html
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