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Home loan deferrals increasing, hardship support triples

Home loan deferrals increasing, hardship support triples

If your household has been experiencing the negative economic impacts of COVID-19, you’re not alone, with an increasing number of Australians requesting hardship support on home and business loans

The latest statistics from the Australian Banking Association (ABA) found that over 57,000 customers have received hardship assistance over the recent lockdowns in parts of Australia. The number of customers has almost tripled since last month, growing from 20,000.

Over 30,000 loan payment deferrals have been recorded for home and business loans. And it’s not just home and business loans that Aussies are struggling to afford, with the ABA’s ‘hardship assistance’ statistics also including delayed credit card repayments and waived fees and charges.

Unsurprisingly, New South Wales recorded the greatest number of customers taking assistance, with 57% of housing deferrals and 69% of business deferrals for NSW residents. In total, 88% of all deferrals are related to home loans, according to the ABA.

However, it is still significantly lower than figures recorded for hardship assistance in 2020, when over one million home and business loans had to be deferred.

How homeowners can ask for help

Chief Executive Officer of the Australian Banking Association, Anna Bligh, said: “While the majority of hardship approvals have come from NSW and Victoria, customers are reminded not to tough it out on their own no matter where they live.”

“As lockdowns continue to be extended across cities and states, it is no surprise more strain is being put on people and businesses, but it is important to remember that banks are here to help,” Ms Bligh said.

“Over the last month, we have seen a substantial rise in business owners putting their hand up for assistance, and I encourage anyone else who is feeling the strain to do the same.

“Support is available to all small businesses and home loan customers significantly impacted by current lockdowns or recovering from recent lockdowns, no matter where they live or their line of work,” she said.

If you’re currently unable to meet your home loan repayments, or your regular income has decreased and you soon may not be able to, it’s worth speaking to your lender as soon as possible.

Home loan lenders have practices in place to help protect you from default due to worst case scenarios like COVID-19, or even small-scale life changes like a job redundancy. Simply, pick up the phone and call your lender and request information about its hardship assistance.

Just keep in mind that a mortgage payment deferral is not “free”, and by pausing your repayments and not chipping away at your principal owing, you may end up paying more in interest over the life of the loan. Ensure you can budget for potentially higher repayments once the deferral is over. Even if it’s only $20 more a month, it adds up over a 25- or 30-year home loan.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

What are the benefits of a reverse mortgage from P&B Bank?

A reverse mortgage allows senior homeowners to unlock the equity in their homes. There is no repayment schedule, and the loan is repaid at the time of selling, if you move out or when the homeowner passes away. The interest accumulates on the outstanding amount and is added to what was initially borrowed.

Here are some benefits of applying for a P&B Bank reverse mortgage:

  • Flexibility to use the funds as desired; you can travel, pay for medical bills or undertake home improvements or use it for your regular living costs
  • A negative equity guarantee ensures the amount you have to repay never exceeds the value of your home
  • A reverse mortgage does not have a regular monthly instalment, and you can repay any amount you wish at any point during the loan tenure
  • You can choose to withdraw the loan amount as per your requirements

The P&B Bank reverse mortgage amount is based on factors like your age, location of the property, and the loan-to-value ratio (LVR).

What is the ME bank home loan approval time?

To start the process of getting a loan with ME bank, you can fill out the online application form. You’ll have to provide information about your income details, assets and liabilities, and the property you want to buy.

Generally, the pre-approval of your loan application can happen within four hours, and in some instances, it may take up to two weeks. It’s important to remember this is only conditional approval.

If you make an offer and the seller accepts it, you’ll need to wait for the cooling-off period, which varies from two to five days depending on where you live. After that, it can take between six and eight weeks after contracts have been exchanged for your application for unconditional approval to be processed.

Is a second mortgage tax deductible?

If you take out a loan to invest in a property, you can claim a tax deduction on the interest you pay as long as the property is earning income. In other words, if you rent the property for the entire year, you can claim a tax deduction for 12 months of interest payments. But, if you use the home for six months and rent it for the other six months, you can claim deduction only for 50 per cent of the interest amount.

You also get tax benefits for items that lose value over the years. But, the entire amount is not allowed as a tax deduction in the same year; instead you’ll have to claim a portion each year over a number of years. 

Additional borrowing costs, such as maintenance fees, stamp duty, offset account setting up fees, Lenders Mortgage Insurance (LMI), and establishment fees, can also be claimed as tax deductions.

Before you claim second mortgage tax deductions, it’s often worth checking with an experienced tax expert.

What is a secured home loan?

When the lender creates a mortgage on your property, they’re offering you a secured home loan. It means you’re offering the property as security to the lender who holds this security against the risk of default or any delays in home loan repayments. Suppose you’re unable to repay the loan. In this case, the lender can take ownership of your property and sell it to recover any outstanding funds you owe. The lender retains this hold over your property until you repay the entire loan amount.

If you take out a secured home loan, you may be charged a lower interest rate. The amount you can borrow depends on the property’s value and the deposit you can pay upfront. Generally, lenders allow you to borrow between 80 per cent and 90 per cent of the property value as the loan. Often, you’ll need Lenders Mortgage Insurance (LMI) if the deposit is less than 20 per cent of the property value. Lenders will also do a property valuation to ensure you’re borrowing enough to cover the purchase. 

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
  • To consolidate and repay high-interest debt like credit cards or personal loans;
  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

What is the ANZ home loan settlement process?

Settlement is the procedure for the official transfer of ownership between the seller and buyer. It’s often done without the seller or buyers input but between both parties’ the financial and legal representatives.

Here is how the ANZ home loan settlement process works:

  1. The solicitor or conveyancer prepares the Transfer of Land document at least two weeks before the settlement date.
  2. The signed document is registered at the state or territory land registry office.
  3. Your solicitor or conveyancer will connect with the ANZ home loan settlement contact and the seller’s solicitor or conveyancer to finalise the date, time, and place of settlement.
  4. You must deposit any applicable amount into your ANZ account three days before the settlement date.
  5. After the settlement is completed, your solicitor or conveyancer will send you a Statement of Adjustment confirming the disbursal of funds from your home loan amongst the involved parties.

How does ANZ calculate early repayment costs?

If you have a fixed interest home loan, you’ll pay ANZ home loan early exit fees for partial or full repayment of the loan amount before the end of the fixed interest rate duration. These fees are also payable if you switch to another variable or fixed-rate loan.

The ANZ mortgage early exit fees can vary and you can get an estimate from the lender before you decide to prepay the loan. However, the exact early repayment cost can be determined when you prepay the loan.

The early exit fees are calculated after considering factors like the prepayment amount, the period left before the fixed-rate duration ends, and the change in the market rates since the beginning of the fixed-rate period. The early exit fees may not be charged if you’re paying off a smaller amount. You can check with ANZ to see how much you’ll have to pay.

How long should I have my mortgage for?

The standard length of a mortgage is between 25-30 years however they can be as long as 40 years and as few as one. There is a benefit to having a shorter mortgage as the faster you pay off the amount you owe, the less you’ll pay your bank in interest.

Of course, shorter mortgages will require higher monthly payments so plug the numbers into a mortgage calculator to find out how many years you can potentially shave off your budget.

For example monthly repayments on a $500,000 over 25 years with an interest rate of 5% are $2923. On the same loan with the same interest rate over 30 years repayments would be $2684 a month. At first blush, the 30 year mortgage sounds great with significantly lower monthly repayments but remember, stretching your loan out by an extra five years will see you hand over $89,396 in interest repayments to your bank.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.