The first step to take if your mortgage holiday is coming to an end is to work out your current position. What’s changed over the past 6 months? By establishing what’s coming in, what’s going out, what’s negotiable and what’s not, you can see a clear picture of your financial position. From here, calculate how much is available to contribute to your mortgage each month. You may find you can pay your usual repayments again, or you may need to have a conversation with your lender.
Next, speak to your lender and have an honest conversation about your circumstances. The fact that you’ve done the groundwork in establishing your financial position will be helpful in arriving at a solution. Your lender may be able to work with you to lower your repayments or convert you to an interest-only mortgage for a period of time, until you’re able to make your usual repayments again.
Despite the fear and anxiety around speaking to your bank about your mortgage holiday ending, lenders are actively working to keep as many mortgagees in their homes as possible. Facing problems now can actually reduce stress down the track.
Banks have announced that an additional four-month repayment holiday may be available to those who are still experiencing financial hardship, but only apply for an extension if you really need it. The longer your repayments are paused, the more interest you’ll accrue and the longer you’ll be paying off your mortgage.
While a mortgage holiday or loan deferral brings short-term and welcome relief during times of hardship, your loan is still growing in the background. If you’ve started earning again since you paused your mortgage repayments, explore ways of recalibrating your position to avoid extending the length of your loan term. If you can, that might mean planning to pay a little extra each month, or contributing to your offset or redraw facility to balance out additional interest payments.
2020 has taught us, with painful accuracy, just how quickly things can change – and how often these things are completely out of our control. When you reach a point where you feel comfortable to do so, take some time to make a plan of action for future financial uncertainty. That might mean working out how many weeks worth of expenses your savings equates to, planning some financial forecasts, or setting up income protection insurance to protect you from the impacts of redundancy or sickness. Doing so in a rational state of mind can take the pressure off when a real emergency hits, and knowing how you’d tackle a loss of income or large expense can increase your financial wellbeing.
Emma Edwards is a finance copywriter and blogger, on a mission to humanize the financial services industry by creating meaningful content that’s accessible and empowering. You’ll find her penning money tips at her blog, The Broke Generation, sharing financial insights on Instagram, or injecting life into content for her business clients.