Going Interest Only Instead

Thousands of borrowers are contacting their bank requesting to pause their loan repayments for 2 or 3 months, which if necessary is in everyone’s best interests. Banks are judged by how ‘clean’ their book is, so they’d rather put something in place for those doing it tough, rather than have a bunch of customers go into arrears. There’s also some vague advice about speaking to your bank to change the terms of your loan, so rather than speaking in riddles, I’ll make clear what this means.

Servicing your loan on an interest-only basis normally attracts a higher interest rate, particularly with owner-occupied home loans, where going I.O doesn’t normally make sense. But rather than pausing your loan repayments for a while, you can ask your bank to change the terms of your loan to be interest only for a few months. Insist that the interest rate should stay the same and you shouldn’t need to pay a higher rate for the privilege – not at a time like this.

A P&I monthly repayment on a $1,000,000 loan at 1.89% is $3,641. By going I.O for a bit, the monthly repayment will more than halve, reducing to $1,575. If you have enough cash flow or funds in your offset to just reduce your repayments rather than pause them, your loan repayment history won’t look as bad. This might help if you’re soon looking for a pre-approval or to refinance. Don’t get me wrong though, if you simply need to pause the repayments completely, please apply to do so.

While you’re on the phone with them maybe ask if they can fix your home loan at 1.89%. Tell them Jason is offering to get you this rate by switching your loan and that you’ll be collecting $3,000 as a refinance rebate. See what they’ll o for you. The fastest way for you to get a better interest rate is to pick up the blower and call your bank. Of course if you’re in a position to refinance, you can have my financial representation for free, and with the help of updated free valuations we can better structure your lending with 3 things we improve; asset protection, tax minimisation and flexibility. And then lastly, there’s the interest rate saving, the very best rates are always reserved for new-to-bank clients.

When people are in a hole, telling them to stay positive doesn’t work. But I hope this lock down gives people the opportunity to clean out their sock draw, fix up those things around the house, watch a boring documentary and read a book. These forced lock downs don’t happen often. Weeding, pruning, geez we have no excuse right now, hey? If you’re really bored you can watch my videos on wealth creation, just search ‘iChoice’ on YouTube.

A bit of timely advice for your young adult kids is that their bank will never send them a text with a message and a link to log in. This is not a bank. Look carefully at the senders actual email address. It’s someone on the other side of the world who’s reading their password as they type it in. Too many get caught our with these. I know it’s not anybody you know, because it’s too embarrassing for people to tell their friends. Well let me tell you that as a 25-year career-banker I clicked on such a text once because it said I was in arrears. Luckily I came to my senses before I typed in my password, but my point is it’s easy to make mistakes when distracted, and right now we’re all a bit distracted.