NAB checking repayment ability of mortgage relief customers for COVID-19

NAB checking repayment ability of mortgage relief customers for COVID-19

If you’re one of the 80,000 NAB customers who deferred their mortgage repayments due to financial strain from the COVID-19 crisis, you can expect a call from your bank shortly.

From this week, NAB has announced it will be calling its mortgage customers who took advantage of its relief package to see if they can begin making repayments.

NAB offered home loan customers the ability to pause repayments for up to six months due to the COVID-19 crisis. Initially, NAB noted it would check in with borrowers at the three-month mark, much like the other big four banks. This announcement means NAB is taking the first steps in reaching out to financially impacted households one month earlier than expected.

NAB Chief Customer Experience Officer, Rachel Slade, said: “The deferral has provided some immediate and much-needed relief, but if customers are able to make payments again, we will be encouraging them to do so.”

“We don’t want our customers to be in debt any longer than they need. We want our customers to choose what’s best for them,” said Ms Slade.

Whether you’re financially able to resume your mortgage repayments or not, this announcement is potentially a good opportunity for you to secure a rate cut. You may just need to be brave enough to ask for one.

Big four bank relief packages

The Australian recently reported that the big four banks have earmarked “billions of dollars for COVID-19-related bad debts”. NAB has allocated $807 million, the lowest of the big four, while ANZ has put away $1 billion. Commonwealth Bank and Westpac have each set aside $1.5 billion and $1.62 billion respectively.

For more information on home loan relief packages, and to see what your bank may be offering, visit RateCity’s relief page.

Bank Home loan relief Credit card relief Personal loan relief
NAB Repayment pauses of up to 6 months.

 

Remove late fees for at least three months, starting 3 April 2020.

Reduce the minimum repayment amount to 0.5% of balance or $5 whichever is higher. From 27 April 2020 until at least 24 July 2020.

Reduce the interest rate on personal NAB Low Rate Classic Cards to 12.99%.

Reduced repayments to as low as $100 a month for 6 months.
CBA Automatically reducing the direct debit repayments for all eligible accounts to the minimum required from Friday 1 May 2020.

Repayment pauses for up to 6 months including a one-off payment to offset any “interest on interest” charges during that time.

Consider requests to switch to interest-only repayments.

Refunding late fees and interest in March 2002.

 

Repayment pauses for up to 2 months.

 

ANZ Repayment pauses for up to 6 months.

Consider requests to switch to interest-only repayments, increase loan, refinance or apply for an equity loan.

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Westpac Repayment pauses for up to 6 months.

Request fees be waived or deferred when restructuring or consolidating home loans.

Request an emergency credit limit increase on credit cards.

 

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Source: RateCity.com.au

Turn your call into a rate cut

While pausing mortgage repayments can allow for much-needed breathing room in a crisis, it does have its own negative impacts. In the long run, it may cost you more money due to interest capitalisation.

After you resume your repayments, you may need to make higher repayments to make up for the increase in interest. You may even extend your loan term for up to six months to accommodate for these missed repayments, which ultimately would cost you more in interest.

One way to try and mitigate these costs is to turn your call with your lender into an opportunity to get a rate reduction.

Even if you’re not with NAB, if you’re a home loan customer who has paused mortgage repayments and are now able to make repayments again, consider asking for a rate cut when you get the check-in call.

Steps to asking for a home loan rate cut:

  • Check what home loan rates your bank is offering new customers. Chances are these rates will be lower than what you’re currently paying.
  • Hop on RateCity’s low rate comparison tables to see what more competitive options are available.
  • When you receive a call from your lender, mention that newer customers are being offered lower rates and you want to be moved to one of these rates.
  • If they won’t budge, mention the lower rates offered by competitors and say you’d consider leaving if your rate is not reduced.
  • Ask for a mortgage discharge form to show you mean business. This is a great way to call your bank’s bluff if they still refuse to reduce your rate.

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Learn more about home loans

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

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.

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.

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.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

How much are repayments on a $250K mortgage?

The exact repayment amount for a $250,000 mortgage will be determined by several factors including your deposit size, interest rate and the type of loan. It is best to use a mortgage calculator to determine your actual repayment size.

For example, the monthly repayments on a $250,000 loan with a 5 per cent interest rate over 30 years will be $1342. For a loan of $300,000 on the same rate and loan term, the monthly repayments will be $1610 and for a $500,000 loan, the monthly repayments will be $2684.

How do I calculate monthly mortgage repayments?

Work out your mortgage repayments using a home loan calculator that takes into account your deposit size, property value and interest rate. This is divided by the loan term you choose (for example, there are 360 months in a 30-year mortgage) to determine the monthly repayments over this time frame.

Over the course of your loan, your monthly repayment amount will be affected by changes to your interest rate, plus any circumstances where you opt to pay interest-only for a period of time, instead of principal and interest.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.