The Coronavirus has completely changed the way people live. Lockdown means families are stuck in the home all over the world. However, you might be getting worried about how Covid-19 can affect your mortgage and refinancing. Here we take a look at whether it’s possible to refinance during the Covid-19 epidemic.

For the moment at least, banks are seeing a slow down on new mortgages offered to those who are trying to get on the property ladder or those who have never had a home before. 

However, some are actually reporting an uptick in those asking about refinancing their loan. This is likely due to people trying to take advantage or record low interest rates.

Before applying, it’s vital you look at your current situation, as well as that of your partner or co applicant, if you have one. So many people have lost their jobs during the pandemic. If you’re one of these, try to hold off from applying, as the likelihood is that you won’t be accepted. You could consider applying for the repayment holiday in the meantime. If you’ve just had your hours reduced, it shouldn’t affect your application too much, simply because most of the country is in the same situation.

An issue you might see is lower property valuations than usual. This is just because of some unease in the market at the moment and risk of property value dropping. Endeavour to get the valuation thrown in for free if you can, because it’s unlikely you’ll refinance if it comes in at a low valuation.

You may also want to ensure you fit inside the “quality customer” niche before applying. Essentially the bank will be ticking you off against a certain criteria. These are usually:

⚫️ Applicants being in a steady job, usually for a few years

⚫️ Healthy credit score (although a good to excellent one is better) for all applicants.

⚫️ Applicants are in control of their finances (this typically means income can cover household expenses like bills and maintenance.)

⚫️ Have built up equity in your current home (this usually means that you haven’t taken equity loans or pulled money out of the home.)

⚫️ Reasonable job security, meaning you have consistent full-time hours instead of someone who has been put on leave of absence.

If you hit all of the above then the likelihood is that you can probably go ahead with confidence and apply for your refinancing, no matter what the lay of the land is in regards to the Covid-19 situation.

If you are on around 80% of your salary at the moment you might want to think about cutting costs, and a mortgage is one of the biggest ones you can pull down. However, you might want to take care as there are updated guidelines coming out which seem to lead toward tighter lending when considering self employed people or contractors. If you fall into these categories, take care when applying and make sure you’ve got a good chance of being approved before going ahead.

If you do go ahead, you should be looking for a rate of around 2.5%, but make sure you shop around. 

If you can’t refinance and are actively struggling, then consider the personal relief package available from your bank. You’ve currently got the ability to defer your loan payments for six months. If you’re in difficulty, look into this plan because it takes some of the financial load off your shoulders. However, you should contact your Broker to learn about the pro’s and con’s before going on any type of hardship or deferred payment plan. Your bank might also be able to help you with your personal loan or credit card. The key point here is that your credit score will not be affected if you can’t make payments under the plan, so long as you didn’t miss any payments in the last few years. 

If you do think you may need help, contact an independent professional or your bank. Even if you’re not sure whether it would apply to you or not it’s better to start the process earlier so they have time to get things started.

Bernie Kyne
Mortgage Consultant
0400141757
bernie.kyne@mortgage-express.com.au

Disclaimer: While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action in relation to the matters dealt within this publication, you should seek professional advice.