Deferring of Home Loan Repayments - Banks Have Different Policies

apprentice on 29/04/2020 - 15:15
Last edited 29/04/2020 - 15:24 by 2 other users

We have a mortgage from Westpac for our house. I lost my job due to Covid19 and called Westpac about deferring the mortgage repayments.

What I was told that I had the option to defer the payments for 3 months but that will add extra $6k to the loan which then will be spread across the life of the loan. I asked if I could freeze the payments and extend the length of the loan for the same amount of time without having to pay extra in interests. They said that's not an option. I can re-finance if I wanted to change the length of the loan. How does it help the customers then if the bank charges you interest for allowing you to freeze your payments?

On the contrary this is what I have found on Commonwealth bank website:

"You can defer your home loan repayments-
You can free-up cashflow by requesting to defer your home loan repayments for 6 months. During this time, interest and fees will add to your loan balance, and after the 6 months has ended, your loan term will be extended so your repayments don’t increase because of the deferrals. Any available redraw will be used first during the 6 months, unless you specifically move it to another account in order to provide extra cashflow. We’ll also make a one-time payment to you, offsetting any interest charged on the interest. The payment will vary depending upon your loan balance and interest rate."

Such a big difference between the policy of two banks.

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  GG57 on 29/04/2020 - 16:13

  You said it yourself: Banks have different policies.
  Or, the staff that you spoke to at Westpac were mistaken; were you able to confirm on the Westpac site?

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  Gareth on 29/04/2020 - 16:30

  +1

  The only difference is that CBA is reporting that they will extend your loan by as much as it has been deferred and that Westpac isn't doing the same. (With the effect of slightly raising your repayments afterwards, depending on how much of the loan term remains. Considering the lower interest rates, this may still be cheaper than the pre-COVID19 repayments)

  In either case, the interest is still being accumulated to your account (presumably about $6k in your/Westpac's case).

  This deferral process is not a gift of an interest-free period on your loan.

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  Thrawn on 29/04/2020 - 17:35

  CBA says your loan term will be extended. It doesn't say that it will only be extended by 6 months. It will end up getting extended by greater than 6 months (more payments) to cover the extra interest.

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  MrHyde on 29/04/2020 - 18:19

  Both policies will still add more interest onto your account. The Commbank policy keeps repayments the same so that you don't have to pay more on a monthly basis; whereas Westpac; the repayments will increase.

  All deferments are individual bank policies; not mandated by Government. So each bank is free to do whatever they want; including not offer any deferment at all.

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  Seraphin7 on 29/04/2020 - 19:29

  +1

  Banks Have Different Policies

  Yeah, I hate it when private organisations have differences between them. Damned free market and it's system of competition.

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  ozhunter on 29/04/2020 - 20:06

  +2

  How does it help the customers

  They allow you to defer your payments…

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  capslock on 29/04/2020 - 21:15

  With CBA your repayments stay the same but your loan will last longer. With Westpac your repayments go up a tiny bit more but the length of your loan stays the same. Either way you still pay the $6k.

  $6k over 20-30 years is not a lot and not worth worrying about. If you really want to save money shop around and move your home loan to the lender with the lowest interest rate. You could save thousands every year that way.

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  CyberMurning on 01/05/2020 - 10:30

  for ANZ:
  https://www.anz.com.au/support/covid-19/personal/

  may want to apply for COVID-19 (hardship) assistance. You can defer your home loan repayments for up to 6 months and ANZ may check in with you after your repayments have been on hold for 3 months to see if you need further assistance. If that happens, interest will be capitalised on your home loan. Capitalising interest means that unpaid interest continues to be added to the outstanding loan balance during the period that repayments are deferred. As a result, a customer’s loan balance will increase over that time and the customer may end up paying more interest over the life of the loan.

  so better not to take that from ANZ unless we really really cant afford, right?

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  Baysew on 01/05/2020 - 19:28

  Westpac Consumer division’s Chief Executive David Lindberg answers your questions

  While I can’t speak for all banks, Westpac’s support means that both principal and interest repayments will be deferred for three (or six) months and incorporated into the remaining balance of your loan. We will also give customers a one-off payment to offset the interest charged on interest which is accrued during the deferral period. If the support isn’t enough, or you just feel a little overwhelmed, give us a call and we can help.

  Policy seems consistent between CBA and Westpac.

  Perhaps contact Westpac again and tell them what Dave said.

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  Some Guy on 01/05/2020 - 20:11

  Refinancing might be difficult if you don't have a job.

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  CyberMurning on 01/05/2020 - 20:27

  -1

  What's the point of deferring if we end up paying more after? Kind of loan shark, they happy we don't pay now because they know they will collect more later

  • 

    El-Rhi on 02/05/2020 - 07:43

    +1

    It helps with short term cashflow if your income has been reduced. Everyone has a choice… if you don’t like the conditions then don’t sign up to it.