What is the 6 month Mortgage Holiday?
Stuff reports that the country’s banks have agreed to a mortgage holiday scheme. This means that customers who have experienced an income drop due to Covid-19 can apply to stop paying their mortgage for six months.
This will give some short-term relief to those whose income is effected by Covid-19.
In the announcement Minister of Finance Grant Robertson said, "As people have been losing their jobs, going down to reduced hours, having reduced incomes, there's a lot of pressure around those mortgage payments,”.
Repayment holidays aren’t unique to the Covid-19 situation, they are available in normal circumstances, but the scheme allows banks to fast-track the application process. This means that banks will not have to go through their normal requirements under responsible lending rules to understand why someone is experiencing hardship, which could significantly slow the approval process in coming months.
Some details of the Mortgage Holiday scheme are still to be determined
The vast majority of New Zealander’s mortgages are with banks. While the government has been involved in coordinating the mortgage holiday scheme, banks (and possibly non-bank lenders in the future) will be responsible for determining eligibility.
Robertson said "We've worked really hard with the banks on this over the last few days and I thank them for their work. They're now having to get the systems set up, so those detailed arrangements for each individual bank will be out within days.
"Please if you're a mortgage holder don't bombard your bank. Wait to see when they come out with the details and contact them then."
Should I take a 6 month Mortgage Holiday?
A key thing to be aware of is that interest will continue to accrue on your home loan during the time you push pause on payments. So, think carefully about whether a mortgage holiday is right for you.
The mortgage holiday will give you a six-month pause in payments without losing your house, but interest would still mount in the meantime. This means you will have more to pay back on your mortgage in the long –term.
Taking a holiday from your mortgage could provide cashflow relief now, but it could lead to more pain in the future as you pay off the accrued interest.
Request a Free Money Compare Mortgage Health Check
If you are thinking about applying for a Mortgage Holiday, it is worthwhile having a Mortgage Health Check first.
A Mortgage Health Check will help ensure that you are getting the best value from your mortgage. With the recent changes to the Official Cash Rate (OCR), and the Mortgage Holiday announcement, there are several options to consider to reduce your monthly mortgage payments or reduce your total interest depending on your situation.
Money Compare have partnered with The Umbrella Company to provide a complimentary Mortgage Health Check service. The Umbrella Company is a specialist financial advisory business covering Auckland and Christchurch. Founded by Sara Hartigan, well known from her role in TVNZ’s “Our First Home” and a regular property expert contributor to Newstalk ZB and Seven Sharp.