Are lenders offering all mortgage holders the option to stop making loan repayments for 6 months?
No, lenders are not offering this. Lenders are offering clients with legitimate hardship claims as a result of COVID-19 the option of putting repayments on hold for up to 6 months, with most looking to review those arrangements after 3 months. This option is subject to approval of a formal hardship claim, either verbally requested or in writing.
But I have heard you get an automatic 6 months pause on repayments?
Lenders who have provided small business loans have universally agreed to provide small businesses with a 6 month pause on repayments without the need to put in formal claims. This is to try and ensure that as many small businesses can survive through this crisis due to the importance of small business owners and the people they employ to the economy and community.
What is a legitimate hardship claim?
Whilst there is no strict criteria in place at present, it is possible that lenders will put in place some universal criteria so that regardless of whom you hold a mortgage with there will be some set criteria around your qualification under hardship.
However, as it stands for any hardship claim you will need to demonstrate a loss of income, be it through loss of job, restricted hours, unpaid leave, loss of clients or capacity to carry out your business as a self employed applicant.
When assessing hardship claims we would expect that lenders will also look to see what strategies and efforts have been made by applicants to manage their financial position over the next 6 months prior to making a hardship claim and the clear link between hardship as a result of COVID 19.
Would a customer be eligible for a pause holiday/hardship arrangement if they have an ahead amount available for redraw?
YES, however the amount they are ahead may impact the timeframe and repayment arrangements with the lender.
Can a customer redraw an ahead amount while on a pause holiday/hardship arrangement?
YES, they can redraw prior to making a claim to support their future living commitments.
Are we allowed to advise a customer they can redraw their ahead amount prior to arranging a pause/hardship arrangement?
YES, as above so they have funds available to support living costs and other commitments.
Does a customer need to provide proof of impacted income/loss of employment?
Our teams will ask how their income has been impacted but that is the extent of verification required for COVID19 customers.
What strategies would lenders be looking for me to put in place alongside or prior to making any hardship claim?
Lenders will be looking to see whether applicants have a cash buffer within the offset accounts or redraw facilities within their loans as a starting point. It is likely someone with funds readily available within these facilities would be expected to utilise at least some of this cash to supplement their loss of income for a period of time and support their living costs.
If clients make hardship claims with those funds available, then you can expect lenders may consider revoking access to those funds particularly if they are available via redraw during the period that no repayments are required to be made. You should redraw these funds prior to making a hardship claim so they are available to support your living costs.
Other strategies lenders would look for you to implement prior to receiving assistance would include, reverting your repayments back to the minimum if you are currently paying above the minimum.
They may also be looking for what other government concessions and assistance you have looked at qualifying for to support yourself financially through this period.
To understand what you may qualify for, please visit the following link.
Would lenders stop me from accessing funds in my offset account?
No, it is highly unlikely this would be put in place however if you have ready access to cash, you can expect that to be taken into consideration when assessing your hardship claim in comparison to others whom may not have access to these funds?
What if I am yet to suffer a loss or reduction of income but may do so in the near future?
It is great to get on the front foot and exploring the options listed above is the first thing you should be doing.
If you have not experienced a loss of income currently then our recommendation is not to lodge a claim however we strongly recommend putting together your hardship proposal so that should you suffer a loss of income you do not waste any time.
What should I include in my hardship claim?
We have provided a link to the website which gives an overview of the information they believe you should include in a financial hardship claim.
We have also provided a template specific to mortgage hardship claims that you can use to provide you with the best possible chance of having a claim approved.
Is there other alternatives to requesting my loan repayments be put on hold?
Yes, lenders will give consideration to a number of different proposals and if you have had only a % of your income lost i.e commissions or bonus or at risk then proposing assistance using some of these alternatives is recommended.
Some of these alternatives include:
- Requesting a reduction to interest only repayments for loans on Principal and Interest repayments.
- Requesting an extension of the loan term to reduce the current repayment.
- Waiving of any fees to convert loan repayments to fixed rates.
If the tenant of my investment property is not paying rent due to a job loss or vacates for any other reason, is that a valid enough reason to request financial hardship assistance?
It may be. We would expect lenders to firstly review whether you have access to funds in an offset or redraw to support yourself initially whilst you work through a solution with your existing tenant and/or put in motion the steps to find a new tenant.
You should also look into whether you can make a claim on your Landlords insurance policy as part of your strategy to support yourself before making a hardship claim.
Finally, our advice in this circumstance is if you have not had a loss of income outside of the rental income, then consider only making a claim for assistance for repayments on the associated investment loan. This will demonstrate your desire and intention to meet your obligations where you can.
How do I lodge a hardship claim?
There are now a number of different ways you can lodge a claim.
You can lodge a hardship claim either by calling through to the lenders dedicated phone line, completing online forms for some lenders and in writing.
Please understand hold times are likely to be significant and we believe will only increase as more people find themselves in a position that warrants making a hardship claim.
Our recommendation is that you lodge your hardship claim using the online form if available (Platinum Advantedge Clients support form) or in writing and follow up progress of that claim either via phone. In writing provides a clear history of contact that can be called upon.
If I have a hardship claim approved and my repayments are not required for a period of time, does the interest continue to be charged or is it waived for that period?
In most instances interest will continue to be charged and simply added to your current loan balance at the time the claim has been approved.
Do I need to make up all the outstanding interest payments when the next repayment is due?
No, lenders will work through an arrangement with you to bring the outstanding arrears amount up to date. Most lenders would work towards putting in place a repayment plan that would have you back on track within 12 months, if possible.
Do I need to make up all of the outstanding principal payments when the next repayment is due?
Again no. As per above any principal payments that have not been made would be part of the outstanding amount to be made up over an agreed period. Lenders may even look at simply extending the term of the loan for the same period repayments were put on hold meaning you would go back to paying the same amount as you were previously, just over a longer period of time.
Will my loan be considered to be in arrears by the lender during this period?
No, there has been direction provided by government and acknowledged and accepted by lenders that loans under hardship arrangements are not deemed to be in default and subject to any penalty rates during the hardship period.
Will that require me to pay a higher interest rate on the amount in arrears?
No, as your loan will not be considered in arrears as per above.
Can I ask to have my loan contract changed to reflect an interest only period as opposed to principal and interest repayments.
Amendments to loan contracts are unlikely and unnecessary as lenders will give consideration to allowing interest payments be made for a period of time without the need to go through a costly and time consuming process of changing the loan contract, as it is likely that would require a full re-assessment of your financial position.
If my claim is approved how will I be notified?
Your lender will provide you with written notification of the change in repayment arrangements and the period for which that repayment arrangement is in place.