Are you in a position where you suddenly need to defer your home loan because of Coronavirus or a change to your employment situation?

Here we will break down how this process works and what the banks do to determine the deferring of loan repayments.

Using an example of a loan of $500,000 at 3% interest per annum with 29 years remaining, the repayments will be $2,152 per month. Let’s assume that the individual or family has to pause those repayments for a period of six months. The interest for that period is approximately $7,500. What the banks are most likely going to do is add that interest that was due and wasn’t charged for those six months onto the loan balance.

The total loan balance now becomes approximately $507,500 at 3% interest per annum over 29 years, the new repayments now equals $2,195 per month. This is an estimate, the interest is charged daily and capitalized on top of the loan so we’ve used some rough figures here just to give you an idea of how the mechanics might work.

If you have had your circumstances changed, get in touch with your bank ASAP. The best thing you can do is get on the front foot and speak to them as soon as possible.