A repayment holiday is when you requested a pause on your home loan repayments. You may request a repayment holiday to cover maternity leave, when changing jobs or for some other circumstance.
Your lender must approve a repayment holiday and may require you to be ahead of scheduled repayments on your loan.
As a result of COVID-19, most Australian lenders have offered to provide a repayment holiday to their customers, resulting in short term financial relief.
It is important to understand the consequences and impact of taking a repayment holiday.
During as repayment holiday, your lender will pause your loan repayments, but interest will continue to accrue and be added to your loan balance (interest capitalisation). At the end of the repayment holiday period, the outstanding loan balance will have increased.
Which is why any repayments, even small repayments you can make to your loan would be beneficial.Credit Rating & Credit Score
Taking a repayment holiday, as a result of the current COVID-19 period, will not affect your credit rating. This is due to your loan not being consider as being in mortgage arrear.
Although it may be tempting to apply for a repayment holiday, it might not be the best solution for everyone. If you would like to discuss your loan or consider alternative options, feel free to contact us.