Many landlords and investors will be starting to feel a hit as a result of the ongoing coronavirus (COVID-19) crisis.
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Your tenants may have been affected too and face financial hardship, which could affect their ability to meet rent payments. As landlords, it’s also possible that you’re facing a decline in your income.
Our partners over at uno Home Loans have an expert team of brokers who have been talking to their customers about how to take some of the financial pressure off and help them meet their home loan repayments.
We asked uno Home Loans about what they’re advising their clients when it comes to managing a property during COVID-19.
Talk to your tenant
As a starting point, having an open conversation with your tenant is more important than ever. Whether you do this via your property manager or directly yourself, it’s important to be updated on your tenant’s current financial situation.
Accepting a lower rent is better than no rent at all, so it makes sense to negotiate with your tenant about what they might be able to pay. This is especially important if they’ve been a good tenant in the past and have always paid their rent on time.
Renegotiate a lower interest rate
Consider asking your existing lender for a cheaper rate. It could make all the difference and help you stay on top of repayments. If your home loan comparison rate doesn’t start with a 2, you may be able to get a better deal.
The easiest way to find out if your home loan is in good shape is to sign up to uno’s loanScoreTM. It only takes two minutes and it’s free! uno will then continuously monitor your loan against thousands of loans and alert you if there are better deals available. Your dedicated uno broker can then help you renegotiate with your current lender or assist you in switching to a new lender so that you can save.
Many lenders are currently offering generous cashbacks and in combination with a lower interest rate, this might just be enough to help you meet the loan costs for the next few months.
Switch to interest-only payments
Another option is to switch to interest-only payments. While the rates on interest-only loans may be higher than principal and interest loans, your repayments could be lower as you might not be paying off the loan balance or principal.
However, at the end of the interest-only period your repayments could increase further to catch up the principal payments that were not made during this period. It could also mean that you may pay more interest over the term of the loan.
Every situation is different, so always discuss your next step with a mortgage broker that understands your situation and can calculate the impact of different strategies and help with negotiations with lenders.
Use your redraw
If you have been making extra payments on your loan, you could have funds available in a redraw facility, which you could potentially access to help you keep meeting loan payments.
Another possibility is to see if you have borrowing capacity and equity in a different property – perhaps your home or another investment property – and use the redraw on that property instead.
Take a mortgage holiday
The last option is to take a mortgage holiday. But a mortgage holiday doesn’t mean complete freedom in meeting your mortgage payment commitments over the long term. Any repayments you miss are added on to your loan which could end up adding to your loan amount when the crisis has passed, so it’s a strategy we suggest you analyse carefully.
And finally, keep an eye on the news and find out if your state government is offering any financial assistance for residential property landlords. The Queensland Government, for instance, is offering relief on land tax.
If you ask your mortgage broker for advice and discuss whether these strategies are right for you, you’ll have a much better chance of getting through the COVID-19 crisis without missing any loan payments.
And in the time it took you to read this article, you can find out whether you are on a great home loan today by signing up to loanScoreTM.
Your loanScore is an indicative rating of your current loan health. uno compares the most recent data and product preferences you provide to the products available through its lender panel. Your loanScore may change if any of this data or lender information changes and uno will provide updates as part of its Active Home Loan Management (AHLM) service. This service also provides an estimate of potential, net savings you could make over three years by refinancing or by renegotiating with your current lender. To do this uno makes some assumptions, including that the data you provide is accurate and that your repayments will remain the same. Refer to the AHLM terms and conditions for details of how uno calculates loanScore.
uno does not guarantee that it will be able to find you a better loan, with a higher loanScore, or to save you money until it completes an assessment and obtains lender approval. uno also can’t guarantee your application will be approved, even if it is with your current lender.