Pausing your mortgage, also known as a home loan deferral or a mortgage holiday, is a way a lender can suspend the borrower’s mortgage payments for a set period of time. However, is that something you should really be considering?
During COVID, the number of borrowers requesting mortgage holidays from their lenders surged. Now with rapidly rising interest rates and the escalating cost of living, borrowers are once again looking at a loan deferral as a way to get back on track.
While pausing your mortgage can provide temporary relief for struggling borrowers, it is important to consider the advantages and disadvantages before deciding if it is the right choice for you.
If a mortgage holiday is not the right choice for you, there are alternative options that may be more beneficial.
First, borrowers can potentially negotiate with the lender to see if they could receive a lower interest rate.
It may also be possible to refinance the mortgage to a lower interest rate, or open up other home loan options and features including offset accounts and redraw facilities. Borrowers can access any extra repayments they have made on their mortgage to help with financial difficulties by using a redraw facility if they already have that option in place.
Another option worth considering, is switching to interest-only payments, which can reduce monthly payments for a set period of time. This could help buy some time to get finances under control.
If you would like to chat to us about the pros and cons of pausing your mortgage repayments, or have any other finance and/or property question, the best place to start is to contact us for advice. We are only an email or phone call away, on 02 8004 2222 or book an appointment.
Although we are located in Crows Nest, we service clients from St Leonards, Artarmon, Wollstonecraft, Cammeray, Northbridge, Naremburn, Neutral Bay, Greenwich, North Sydney, Waverton to Willoughby and all areas of Greater Sydney.
PS This article is prepared based on general information. It does not take into account individual financial or property objectives or needs and is not financial product or investment advice.