Coronavirus: How to reduce my mortgage repayment pressure?


– Hey, it’s Connie from
Prosperity Finance. I hope you and your family
are keeping safe and well. In New Zealand, there are more
and more coronavirus cases. It’s developing so
rapidly causing, you know, heaps disruption on the
economy, on our country. And some people already lost their jobs, and some other people worry
about losing their jobs. A lot of us have home loans. And home loan repayment is one of the biggest bill for a household. If we do expect our income to be dropped, you’ll probably worry that, you know, what are you going to do with
the home loan repayments? Are we losing our home? What are the options available to us? So in this video, I’m
going to share with you many options still available, but you need to act quickly and you need to get professional advice. So firstly, if you are already
unfortunately lost your job, firstly, you need to look at, if you have income protection. If so, please claim it. Or go to Work and Income and see what are the subsidy available for you. And also, most of the banks have financial hardship option for you. And they will help you to reduce your home loan payments temporarily or even cease your repayments
for a little period of time so that you can get back on track. For the majority of us, you probably work less hours, get less income, or maybe risk of losing a job. If that’s the case, you may want to watch this video in full. I’ll show you there are some options you can use immediately. So number one, if you
have some spare cash, for example, you have 20K
from saving or gift money, instead of paying down your home loan, you could restructure your home loan. You can take out 20K home
loan from your current loan, and then set it as a revolving or offset, and use your saving to
offset against that 20K loan. That way, reduce the
interest on that 20K loan. But on the other hand,
you still have control over your 20K savings. It’s better than paying down your loan. Cause once you paid it down, you lose your 20K. And if you need it, but you
don’t have sufficient income, bank won’t top up that 20K for you. So, revolving or offset, make sure that you still have access to some emergency funds. Number two, you can look at
increase your credit card limit. Credit card limit is not always good, especially when you have a big limit. You are exposed to a lot of risk. Some people use online scam. But at the moment, you can
temporarily increase your limit, so that you have access for emergency. Number three, recently bank
dropped the fixed term rates. If you are still on fixed term, you may not see the benefit yet. But if you worry about repayment, you can break your loan now. Yes, there’ll be some break costs. And also the savings of
interest versus break cost, probably there’s a little benefit. However, you know, once
you refix at a lower rate, you immediately drop your payment amount. So that will help you. If you worry about paying the break cost, and you are already with the bank for at least three or four years, then you could consider
refinancing to another bank. Because they will pay you a cashback to offset the cost of breaking. Number four, it’s about
breaking your loan, and extend the loan term. For example, if you
have 200K loan balance, and the remaining loan
term is only 10 years, you could break your current loan, and extend the loan term to 30 years. That way, you will automatically
reduce the payments. Bear in mind there’s also
a break cost to do that. And you could use a combination
of breaking your loan, and take your loan to another
bank by way of refinancing, locked at a lower rate, and extend it to a 30 year term, and get a cashback to
cover some of the cost. Number five, if you are on
principle and interest payment, consider change the payment
method to interest only. Interest only is not best option because in the long run,
you pay more interest. But as a temporary kind of relief, you could consider this option, that will lower your payment amount. If all above doesn’t work, then consider mortgage holiday. Bank will consider a mortgage
holiday up to three months, that give you that time
to adjust your situation; to find a job or sell your assets, sell your house, and back on track. So a mortgage holiday could
be one of the options. During that mortgage holiday period, you don’t really pay anything to the bank. However, just bear in mind, the interest actually doesn’t stop. It’s simply added on top of your loan. The downside is that your loan size is getting bigger and bigger. So it’s only a temporary kind of option. And make sure you get back
on track as soon as possible. And the bank need to consider your case. They may or may not approve
that mortgage holiday option. So these are the kind of options available you can do with your home loans. There are other things
outside the home loan, that can also help you to get some relief. For example, you can
apply KiwiSaver Holiday. That help you to get more
money in your pocket right now. The next option would be reduce
your discretionary spending, such as eating out. You can still have takeaway,
but at a reduced amount. Or defer purchasing a big item. Maybe you defer the plan of
replacing your smart phone. So that could save you a
thousand dollars immediately. Next one, consider taking
a boarder in your home, that boosts your income. Or find a part-time job. Especially if you reduce
your working hours with your current job. Next, renting out your current home, and move in with your family, your parents, your sister, brother. That way, it will reduce overall expenses and also boost your income. Next one is about selling
some small assets. If you have a spare car at home, then you and your partner
can have a carpooling, and sell the other car. Or sell some appliances
that you’re not using much. Finally, if you want to
reduce your payment burden in the longer term, then probably consider
selling your rental property to help you reduce the mortgage payments. It’s better to do it yourself. And better to do it early so that you get most of the sale proceeds rather than wait for the
bank to force you to do that. That’s probably the last resort. So in this video, I shared
with you about 13 tips that help you to overcome
the cashflow issue, to minimize the home
loan payment pressure. My final tip is get onto these
options as soon as possible. You don’t have to wait
for the last minutes and miss a payment. The principle is to make sure you never miss a payment, okay? And better to have a professional advice to get a plan in place. You know, we are here to help you. We also will get hit by the coronavirus. No one can be immune from that. And a lot of restructure
that we’ll be doing for you will be no any commission. But our commitments is to
help you as much as we can. Please feel free to
contact us if you struggle. Thank you for watching
and also please share with your family and friends so that they can get that benefit as well. I’ll see you next time, keep safe, keep well. Bye for now.

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