The current economic conditions created by the coronavirus pandemic have left many with unexpected consequences. Data from the Australian Bureau of Statistics show that unemployment rate has been increasing since March and soared to 7.5% at its height in July.
At the start of the COVID-19 pandemic, financial institutions extended an olive branch to customers impacted by the pandemic in the form of mortgage repayment deferments. The deferments were initially to last until September 2020 but the banks have agreed to extend the support by another 4 months to those who are still suffering severe financial hardship by then.
A recent survey found that 40% of those intending to rely on the deferral extension overstated their income in their home loan application and 15% understated their indebtedness. A whopping 67% of them are on JobKeeper and 25% are on JobSeeker.
While it is a relief for many in the meantime, such assistance will not go on indefinitely. Those who do not qualify for any future extension(s) will have to start repaying their mortgage as soon as this month.
Steps You Can Take
With the government tapering its COVID-19 reliefs, some people are in a precarious financial position. If you are one of these people, here are some of the things you can do.
Refinancing Your Property
If you have been paying the mortgage for a number of years and there is substantial equity in the property, you may choose to refinance the property with your current financier to reduce the monthly mortgage repayments. You may even switch to another bank that offers a lower interest rate. It should be noted however, that you will be paying more to your financier in the long term should you choose to refinance your property and extend the period of your mortgage.
Sell your property
You may try selling your property and move into a rental or a cheaper property. If you have a property with negative equity, that is, the property with worth less than the mortgage, we can help negotiate a settlement of the shortfall. We have previously written on how we helped a client settle a mortgage shortfall here.
Negotiate with your creditors
You may also want to negotiate some form of payment arrangement for the other debts to free up some much-needed cash. These debts may be tax debts, personal loan or credit card debts, and debts owed as a result of personal guarantees.
We have for years assisted clients in negotiating either a settlement, or some form of payment arrangements with their creditors. These negotiations are informal in nature and they are the most cost effective and efficient way to compromise your debts.
Contact Us For Assistance
Apart from formal insolvency appointments, we offer a suite of other services to assist clients with cashflow issues or those who are simply finding it hard to keep up with mortgage repayments. Our team consists of Chartered Accountants and members of the Australian Restructuring Insolvency and Turnaround Association (ARITA) who can help you ride this out. We also work with professionals in the finance industry to give you a truly bespoke solution.
If you are affected by COVID-19 and can no longer afford your mortgage repayments, please contact our Brisbane or Gold Coast office for a free, no-obligation consultation. Our experienced staff will be able to explain the options that are available to you and assist you.