We've been receiving questions about the options available to customers who can’t afford to pay their home loans as a result of Covid-19, including the loan repayment deferral announced by the Minister of Finance last week.
Ben Kelleher, ANZ NZ's Managing Director Retail and Business Banking, outlines some of the options available for eligible ANZ customers.
Covid-19 restrictions have meant many people have less money coming in than usual. If they’re a home-owner, they might be concerned about how they will pay their home loan until things return to normal.
Recently, there has been a lot of publicity about home loan deferrals (or home loan holidays as they’re often called), but there are other options, often with lower impacts, to help customers stay on top of their mortgage.
Loan repayment deferrals
For qualifying customers, mortgage repayment deferrals or loan repayment deferrals mean they will not make principal and interest repayments on their loans for up to six months, although interest will continue to accumulate.
This would mean a six-month home loan deferral could add about $4500 to the cost of a loan for someone with a $250,000 mortgage at 3.5%. At the end of the deferral, if customers keep their payments the same their loan term will extend by 15 months.
Loan repayment deferrals are designed to help reduce customers’ outgoings by temporarily stopping home loan repayments. Loan deferrals might not be for everyone. At the end of the loan deferral, the customer will need to either extend the term of the loan or increase their regular repayment amount.
Loan repayment deferrals increase the amount owing on the customer’s loan.
Although home loan repayment deferrals are available for up to six months, customers may consider whether a shorter term would provide enough relief. The shorter the deferral term, the less impact it may have on their loan over the longer term.
Some terms will apply. To be eligible for a home loan repayment deferral, customers must:
- Be a personal or business customer with an ANZ Home Loan secured by a mortgage over a residential property;
- Have been financially impacted by COVID-19, or have genuine concerns COVID-19 will financially impact them in the future, and;
- Be up to date on their repayments and have a good account history with us.
If customers have already missed their repayments or their account history isn’t the best, they may still be eligible for a home loan repayment deferral. There may be some extra steps that apply, but we’ll work through the customer’s particular situation.
Home loan repayment deferrals are currently only available on ANZ Home Loans with principal and interest repayments. We’re working to extend home loan repayment deferrals to ANZ Home Loans with Interest Only repayments.
Home loan repayment deferrals won’t apply to ANZ Flexible Home Loans. If you have an ANZ Flexible Home Loan and you’re having problems with the interest charged on your credit limit, please talk to us – there may be options that could help.
The deferrals include home loans and business home loans, if these are secured by a mortgage over residential property.
Customers can apply for home loan deferrals with the online form and ANZ will contact them to discuss their circumstances.
Forms for home loans and business home loans are available here:
Interest-only home loans
If customers can still maintain some payments on their home loan through the Covid-19 crisis, but are still concerned their repayments may be too high, even if we extend the loan’s term, they may want to consider a move to interest-only payments.
This means that while they will need to pay interest each month, the principal (the amount they borrowed) won’t get any smaller for a time.
If property values fall, it could mean customers on interest-only loans see a drop in equity of their properties.
At the end of the interest only term, the customer will need to move back onto principal and interest (table) repayments, or repay their loan in full. The amount of their repayments may also increase, as the customer will have less time left to pay off the loan amount.
If the customer has a fixed interest rate on their home loan, an Early Repayment Recovery may apply if they move to an interest only loan.
Extend your loan term
Every customer’s circumstances will be different, so another option might be to restructure lending to reduce the amount they’re paying in the short term.
If a customer has already paid off some of their loan, we might be able to extend the term of the loan and reduce the amount of their regular repayments.
While the customer pays less each month – which might be useful if money is tight – the loan may end up costing more in the long run, as they may pay more interest over the longer loan term. However, the customer also keeps paying off their loan.
We’ll talk to customers about their options when they apply.
Help from the Government
Financial support might be available from the Government if someone has lost their job, had their hours reduced, or can’t work. If a customer has lost their job, their hours have been reduced, or they can’t work at the moment, the Government might be able to help with essential living costs, and urgent or unexpected costs.
The Government is also offering a wage subsidy scheme available for all employers that are significantly impacted by Covid-19 and are struggling to pay employees.
Find out more on the Government’s website, Unite Against COVID-19, or call the free helpline on 0800 779 997 (8am–1am, 7 days a week).