Eviction moratoriums extended as COVID-19 lingers 

Eviction moratoriums extended as COVID-19 lingers 

Investors managing rental properties won’t be able to evict tenants after some state governments extended their moratoriums. 

A moratorium on evicting tenants impacted by the COVID-19 pandemic has been extended in New South Wales by another six months, Kevin Anderson said, the minister for better regulation.

“We know the pandemic has resulted in financial difficulty for so many people in NSW,” he said.
 
“As the impacts of COVID are ongoing, we intend to extend the measures until March next year which will allow more time to return to normal.”

The extension means landlords won’t be able to evict tenants who have fallen behind in rent because they have been impacted financially by the COVID-19 pandemic -- unless they have “attempted to negotiate a rent reduction in good faith”.

It also prohibits tenants from being listed on databases if they fall behind in rental payments, and extends a 90 day notice period for evictions instituted for other reasons.

“(These measures have) meant that many tenancies have been able to continue, keeping a roof over people’s heads and giving landlords the security of continued rental payments,” Mr Anderson said.

More than 5000 landlords, tenants and agents have enquired about the new policies with NSW Fair Trading since they were instituted on April 15. 

Rent relief practiced around the country

Most Australian states legally authorised the postponement of rent payments at the dawn of the COVID-19 pandemic earlier this year. Few states have chosen to extend them, while others are scheduled to expire in the near future. 

Victoria has extended its moratorium on evictions after a second wave of the pandemic led to a state of emergency and state of disaster being declared.
 
The moratorium was instituted on 29 March 2020 in Victoria and it will run for a year until 28 March 2021.
 
Victorian landlords are also required to discount rent for tenants impacted financially by COVID-19 and are to suspend rental increases.
 
South Australia and Western Australia have also extended their rent moratoriums to March 2021.
 
Queensland is not extending its eviction moratorium and it is scheduled to expire on 29 September 2020. However, there are some specific exceptions that will expire on 21 December 2020, such as allowing tenants to break tenancies quickly if they’re subject to domestic violence.
 
The ACT’s moratorium is currently scheduled to expire this year on 22 October, while Tasmania’s will elapse on 1 December. 

Landlords offer some relief but renters say it’s not enough

The financial fallout from the pandemic is affecting both landlords and renters, but the question remains whether the pain inflicted is being distributed evenly. 

Renters surveyed said they were generally not awarded adequate reductions, a claim widely disputed by landlords

About 9 per cent of renters confronted with a loss of income during COVID-19 were granted relief with an adequate discount, advocacy group Better Renting found, despite landlords having the option of deferring mortgage repayments.

“Most renters have no leverage in negotiating a rent reduction and are entirely dependent on the benevolence of their lessor,” the group said.

“Some renters began negotiations for a rent reduction only to be thwarted by an alienating process.”

Real estate agents take a percentage of paid rent, the report noted, creating “a disincentive to facilitate rent reductions”.

The Property Investment professionals of Australia (PIPA) cited their own research claiming 45 per cent of landlords provided rental relief to tenants who had suffered a loss of income from COVID-19.

PIPA did not quantify if this relief was in the form of a rent reduction or a deferral of payments, where the latter would require renters to back pay any outstanding rent.

Additional PIPA research found the majority of property investors managed to maintain their investments during the pandemic with little impact. About 92 per cent of them did not apply to defer their mortgage repayments and 75 per cent of them didn’t have to extend the term of their loans.

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How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

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Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What is mortgage stress?

Mortgage stress is when you don’t have enough income to comfortably meet your monthly mortgage repayments and maintain your lifestyle. Many experts believe that mortgage stress starts when you are spending 30 per cent or more of your pre-tax income on mortgage repayments.

Mortgage stress can lead to people defaulting on their loans which can have serious long term repercussions.

The best way to avoid mortgage stress is to include at least a 2 – 3 per cent buffer in your estimated monthly repayments. If you could still make your monthly repayments comfortably at a rate of up to 8 or 9 per cent then you should be in good position to meet your obligations. If you think that a rate rise would leave you at a risk of defaulting on your loan, consider borrowing less money.

If you do find yourself in mortgage stress, talk to your bank about ways to potentially reduce your mortgage burden. Contacting a financial counsellor can also be a good idea. You can locate a free counselling service in your state by calling the national hotline: 1800 007 007 or visiting www.financialcounsellingaustralia.org.au.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

How much debt is too much?

A home loan is considered to be too large when the monthly repayments exceed 30 per cent of your pre-tax income. Anything over this threshold is officially known as ‘mortgage stress’ – and for good reason – it can seriously affect your lifestyle and your actual stress levels.

The best way to avoid mortgage stress is by factoring in a sizeable buffer of at least 2 – 3 per cent. If this then tips you over into the mortgage stress category, then it’s likely you’re taking on too much debt.

If you’re wondering if this kind of buffer is really necessary, consider this: historically, the average interest rate is around 7 per cent, so the chances of your 30 year loan spending half of its time above this rate is entirely plausible – and that’s before you’ve even factored in any of life’s emergencies such as the loss of one income or the arrival of a new family member.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

What percentage of income should my mortgage repayments be?

As a general rule, mortgage repayments should be less than 30 per cent of your pre-tax income to avoid falling into mortgage stress. When mortgage repayments exceed this amount it becomes hard to budget for other living expenses and your lifestyle quality may be diminished.

What is an investment loan?

An investment loan is a home loan that is taken out to purchase a property purely for investment purposes. This means that the purchaser will not be living in the property but will instead rent it out or simply retain it for purposes of capital growth.