How can a Mortgage Broker help during the Covid 19 crisis?

We’re all living in unprecedented times. The world feels like it has turned on its head and if you’re one of the unfortunate Australians who has either had a family member or friend sick with the Coronavirus who has had their employment affected by it, you’re probably feeling like there is no end in sight.

If you have been affected financially and you have a mortgage, you’ll be looking for ways to ease the burden. Thankfully, the Australian Government and Australia’s banks have been proactive in their response and Australian’s do now have the ability to gain some relief.

This is where a mortgage broker can assist in guiding you through the options you have and helping you assess the right path for your needs.

Negotiating a better rate

The first and easiest path is the broker negotiating a better rate with your current lender on your behalf. Many borrowers don’t know their current rate, especially with the recent rate movements, and your broker can approach your lender on your behalf, negotiate a better rate and have this applied, generally within 2-3 business days. Lenders are fairly open to doing this, understanding the current competitive climate and you as the borrower don’t have to do anything, the discount will be applied on your behalf.

Reduce your mortgage repayment

This leads on to another simple way to improve cash flow and that is to reduce your mortgage repayment to the minimum. Many borrowers aren’t aware that when there is an interest rate reduction, many lenders leave your repayment as is, they don’t reduce it down with the lowered rate. This has the benefit in that you are making extra repayments into your loan, thereby reducing interest and shortening your loan term. By reducing your contracted repayment down to the minimum, you’ll free up additional cash flow that can be utilized in other areas. Your broker would be more than happy to assist in doing this,

Hardship pause your repayments

If you are one of the unfortunate borrowers who have been affected financially, nearly every lender is providing a repayment pause or what they call a “hardship pause” on your repayment. They are generally offering between 3-6 months for this. Please view this as a last resort as the interest on your loan will continue to charge during this period, meaning your loan balance will actually be greater than before you pausing. After the repayment pause, the lender may either increase your minimum repayment or increase your loan term to make up for this extra interest charge. Thankfully the lenders have agreed that borrowers who take up this option will not be impacted with a negative credit event. Please keep in mind this should be utilised as a last resort rather than a precaution as you will pay more interest. Your broker is receiving daily updates regarding lender communications and can guide you through how to apply, the time it takes etc..

With rates being at record lows, a borrower could also consider refinancing to a lower rate or superior product, either fixed or variable. Current fixed rates are in the very low 2%’s so there are massive savings to be had. Many lenders are also offering refinance rebates, (cash back), some up to $4,000 to do so. There are options there for you to refinance your home loan, consolidate your debts and minimize your loan repayments, especially during these difficult times.

Take the time to be proactive

Please be proactive, contacting your broker as soon as you can to see how they can help guide you through what is an extremely difficult period.  If you don’t have a broker, contact Matt, Peter, Steve, Paul or Ian at Salt Financial group and ask for a referral.

Extracted from an article by Anna Ruffo of Mortgage Choice, 15th April 2020