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Covid-19: Mortgage holidays

Friday, March 27, 2020

A what-do-we-know-what-don't-we-know about mortgage holidays so far: 

  • Debt-deferral, not debt-forgiveness: Interest will continue to accrue for the duration of the 'holiday'; 
  • More information to come: Most banks have signaled that more information/firmed up packages will be announced the week of 30th March; 
  • Packages designed more for owner-occupiers rather than investors: Investors should get in touch with their brokers for a more global and long-term approach; 
  • Hold if you can: We expect rules around mortgage holidays, refinancing, restructuring to be relaxed in the next week or so until banks can put out packages that speak specifically to the challenges of Covid-19 and that reflect the deal they have struck this week with the government; 
Some tips for investors: 
  • Talk to your broker: Resist the urge to knee-jerk, get in touch with your broker to get a strategy in place. We note that our broker partner Kris Pedersen Mortgages & Insurance is on extended hours to help investors through these times; 
  • Don't rush to call: Banks are absolutely inundated this week helping customers with immediate cash-flow challenges if you are able to, give your bank some space to deal with those calls first; 
  • Email and use online forms: Let's do our bit to avoid overloading the phone network, email or use online banking secure mail facilities if you can; 
  • Be clear with your bank: Tell them exactly what relief you are after (mortgage holiday/restructure/refinance) and how your income is affected to minimise back and forth; 
  • Get onto Twitter now: For live announcements (ANZ, ASB, BNZ, Kiwibank, Westpac) or get into the habit of Googling '<bank name> Covid-19';
  • Break-glass only if you have to: In general, only consider mortgage holiday as a break-glass solution, there are other less financially onerous options available such as breaking early to refix or go interest-only; 
  • Communicate with your tenants: We are already hearing about tenants demanding a rent reduction in light of the government's mortgage holiday announcement. Many people think a mortgage holiday means that the landlord's mortgage debt is forgiven or underwritten by the government and that is not true. It is also not their fault to think that. Everyone is stressed and scrambling. Empathy is a luxury many people don't have right now. Take the heat out conversations. Don't put yourself under the illusionary pressure that you have to respond to a request/plea/demand for rent reduction straight away.  Let your tenant know that you need some time to work out your options and that a mortgage holiday will ultimately put you under more financial pressure. Be compassionate. Be honest. People have a great capacity to be kind, we just all need to have a bit of faith in each other right now. 

General advice from Kris Pedersen Mortgages & Insurance:

 

 

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