As you can imagine we’ve had many conversations with clients over the past few days, some of whom are significantly impacted by Covid-19 and the results of lockdown.

In this short video below, we’ve shared the three most frequently asked questions by clients over the past few days since the lockdown and our advice. Click below to watch.

Three most asked questions during the COVID-19 lockdown answered

Video Timeline

Q1: Should I apply for a mortgage holiday to reduce my mortgage repayment pressure? - 00:50

Q2: My property is supposed to settle in April. Is it likely to happen during the COVID-19 lockdown? - 02:32

Q3: Is it still worthwhile to review my loan structure now? - 05:14

Should I apply for a mortgage holiday to reduce my mortgage repayment pressure?

How does a mortgage holiday work?

The mortgage payment holiday will offer flexibility in repaying your home loan by completely stopping the monthly loan payments for up to 6 months. This allows for some time to adjust your situation, such as find a new job, and then get back on track.

Should I apply for a mortgage holiday?

Taking a mortgage repayment holiday is only suitable if this is your last resort. For example, your situation has been severely affected by coronavirus - you’ve lost your job and you can’t pay your mortgage (even can’t repay interest-only), then applying for a mortgage holiday would be beneficial to you as you don’t want to miss any payments.

Anyone opting into a mortgage repayment holiday needs to be clear about what this mean for them. While there are obvious advantages for people in need, a mortgage repayment holiday is not a free lunch. It may not be for everyone and it should not be your first option because:

• You’re still racking up interest on the remaining loan balance while your payments are stopping for some period.
• Your outstanding loan balance will be higher than they were before the holiday due to the accrued interests. At the end of the mortgage holiday, you will either have a higher repayment amount or a longer term to pay off your loan.

If you are struggling but still have income could consider changing your loan payments from principle and interest to interest-only, or extending your loan term. As a recent example, some clients found that moving to interest-only payments freed up $1000 a month. So only consider a mortgage repayment holiday as your last resort. In case you are not sure what is the right move – please get in touch with us so you can understand what might be most suitable for you.

My property is supposed to settle in April. Is it likely to happen during the COVID-19 lockdown?

If you’re in the middle of a property transaction, it’s likely to be affected by the COVID-19 lockdown in New Zealand. Say your property will due for settlement this month, you might be wondering can your property be settled or not?

First, let’s look at what factors could affect settlement during the lockdown period:

How to sign loan documents during the lockdown?

Normally you go to your solicitor's office to physically sign the loan agreements. Now it becomes not allowed during the lockdown. Some solicitors can work virtually with you to get your loan documents signed while some haven’t adapted to the new process. You need to contact your solicitor to see if they are still remotely working. If so, find out what their process of signing documents.

Does bank accept non-original copy for property settlement?

Yes, most of New Zealand mainstream banks can accept the non-original copy for property settlements.

Can I move house during the lockdown?

The moving company have stopped operation during the lockdown period as they are not essential service. If you have to move into a new house, you need to use your private vehicle to move your furniture. If you can’t do this, some vendors may not accept this as an excuse of not to settle.

The property inspection can’t be proceeded during lockdown, what should I do?

Say you’ve signed an unconditional offer, but you have not yet inspected the property before the lockdown. Obviously you can’t inspect the house during the lockdown period.

Ask the vendor if they allow to keep some money, $10,000 for example, in the solicitor's trust account and proceed with the settlements, then the inspection can still be carried out in post lockdown period. Just in case you find some issues during the inspection, then some remedy can be deducted from that $10 000, so through this way can make the settlement happen.

It may still be possible for settlement to go ahead during the lockdown period, depending on how the above four factors can be fulfilled or not. If you are not able to settle during this period, it’s best to work with your vendor or your buyer and see if both parties agree to delay settlements.

Is it still worthwhile to review my loan structure now?

Some borrowers asked: “my income has been affected by COVID-19 and been reduced, why should I still go ahead for a loan structure review now?” or “My income hasn’t been affected, so it’s not necessary to have a loan review.”

While the current environment may be very damaging to a lot of people, many others may not be affected. We believe at present it is worth you consider reviewing your existing position around your finances. Right now is a chance to reflect what could go wrong and what could affect your income. It is still a good practice to review your loan from time to time. Here are a few areas that you need to look deeper:

• Avoid one bank - If you have more than one property in New Zealand, it's best to split them with different banks, so that you have better protection.
• Set up a revolving facility or an offset account – If you don’t have, it's never too late to set up one as an emergency fund.
• Make sure your income and your partner’s are credited into different banks – during the crisis time like this, bank would only have the compacity to consider their own customers. Say you are thinking about borrowing more, it can be challenging to go elsewhere if your bank says no. By splitting both of you and your partner’s income into different banks, then you would have at least two options at the crisis time.

It’s vital to engage a professional mortgage broker to seek expert advice. We are happy to help you review your current situation and find the best solutions for you.

Prosperity Finance – here to help

The key piece of information here is that there are options to assist you in difficult times, and we are definitely here to help you in facilitating your requirements as best we possibly can. If you would like to have a chat all about any of the above, please call us at 09 930 8999 and we will be in touch.

Read Further:

Coronavirus: How to reduce my mortgage repayment pressure?

Coronavirus: Further implications on NZ bank’s appetite for home loans

Does Coronavirus threaten your business? - 5 home loan tips for small business owners

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.