01 Apr All You Need To Know About Mortgage Holidays

What is a Mortgage Holiday?

A Mortgage holiday is essentially a form of agreed arrears where you don’t make payments on your loan for a short period of time. However the name can be quite misleading as the interest is still accrued during this time and added onto your loan balance at the end of the mortgage holiday.

Pros

For unforeseen circumstances such as what we are currently experiencing where household income could be significantly less it gives you the opportunity to be able to keep your home rather than forced to sell if you can no longer make mortgage payments.

Allows you to have more cashflow to help in tight situations

Cons

Interest is still charged and you will even be charged interest on interest so it will cost you more over time.

Property equity will decrease significantly and could push you over the LVR levels and higher interest rates may eventuate because of this.

Slow you down if wanting to purchase an investment property

Alternatives

Reduce payments to minimum – If currently paying extra monthly repayments can look to decrease the payments to the minimum to help cashflow

Move payments to interest only – restructures from Principal and interest to interest only will mean you are still paying the interest portion of the loan so is a lot cheaper in the long run as the balance is not added to the loan like a mortgage holiday.

Withdrawl Kiwisaver – if can prove significant financial hardship you may be able to withdrawl some of your Kiwisaver savings

The individual banks are yet to finalise their terms and conditions to be eligible for the Mortgage holiday so once these are confirmed I will let you know. To all those who are considering taking the mortgage holiday up I suggest exploring all other options first and use it as a last resort!

For more information about the mortgage holiday or alternative options please get in touch jonny@dixonmortgages.co.nz 

I am more than happy to help

Stay safe everyone!

Jonny