Take a mortgage holiday
Going away on holiday?
Wouldn't be nice to get a break from paying the mortgage for a while as well? You wish!
There are a few options you can choose from to lower the burden of payments during the upcoming holidays. A word of caution though - it will come at a cost unless you plan ahead and save in advance.
If you have holidays on the horizon and they have been booked for a while, why not make excess payments towards your mortgage in advance? There are quite a few lenders who will let you draw from excess payments to meet regular monthly payments. Of course this won't help in reducing the interest burden, as your excess payments will now go toward meeting regular payments. However, if it is a short holiday and you don't want to worry about your mortgage, you could discuss this with your bank. You will need to have this facility set up before you catch that plane!!
There are over 80 institutions that will allow you a repayments holiday and over 195 standard home loan products that have this facility. The time period of a repayments holiday varies between 2 months to 12 months, depending on the excess payments in your account. There are no additional costs when taking up this feature. Simply discuss it first with your bank.
If you are planning a long holiday, maybe going overseas on a working holiday, another option to decrease the burden of mortgage payments would be to opt for an interest-only loan for a period of time. This strategy will not absolve you of payments altogether, but could certainly bring down the amount you need to fork out each month. Here again, there could be a cost involved in switching from a principal and interest product to an interest-only product. There would also be an upper limit to the interest-only term on most loans. A word of caution again, it should only be used as a short term measure, as anyone wanting to pay off a loan should recognize that the only way to do it is to make as many excess payments off the principal and interest. An interest-only loan certainly keeps the loan alive but does not help in reducing the outstanding balance.
Finally an expensive option, but an option nonetheless. If you are facing a real challenge in making those monthly payments and you really do need a break to sort things out there is an option called a "Repayment holiday". There are however strict rules around it. Most institutions will allow this if you have been with them for a certain period (around 2 years at least), and have not been late in payments prior to this. Your loan will need to be a principal and interest loan. You may be granted a holiday for 3 months usually - where you make no monthly repayments, but the account continues to accrue interest. Once the period is over your repayments will be recalculated over the life of the remaining term. These repayments may be slighter higher than your original monthly payments, depending on how much you have paid in the first 2 years. Furthermore, there will be a fee to avail of this feature. Of course you need to discuss this option with your bank before making a decision.
How do I compare mortgages?RateCity is the best website to shop around on for over 2000 home loans and most other financial products. At RateCity, you can use expert comparative data from CANNEX, Australia's leading financial research and ratings firm. CANNEX has analysed and evaluated hundreds of products to award five stars to only the very best. The CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.
Use our easy search tools to compare home loans at RateCity.
SEARCH BY: