Sometimes your circumstances change unexpectedly and you no longer have the income available to meet your financial commitments as easily as you did before. Some home loans come with features that help to ease the financial pressure in times of difficulty.
In this article we explore two common options and how they work.
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Repayment Holiday
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Home loans that allow you to make extra repayments and access these extra funds via redraw, often have a repayment holiday feature as well. If you’ve made extra payments into your home loan account, and have built up a bit of a ‘cash buffer’, a repayment holiday allows you to reduce or stop making repayments for as long as you have sufficient funds to cover your scheduled repayments.
A repayment holiday is a flexible option that you can make use of whenever you like, and as many times as you like, just so long as you have the funds available.
Remember to contact your lender before you decide to take a repayment holiday so they can check whether the available funds will cover the payment you wish to miss or reduce. Plus if you pay your home loan by direct salary credit or direct debit, you’ll need to arrange to cancel or reduce these payments.
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Parental Leave & Other Circumstances (Care Lifestyle Option)
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Many home loans have options designed to help you when your income is temporarily affected by situations such as maternity or parental leave, accident, illness or retrenchment. These options typically allow you to defer a portion of your usual repayments on your home loan for a set period – often up to 6 months at a time.
You usually need to apply in writing to your lender for the option and provide supporting documentation such as a redundancy notice, maternity/parental leave approval, or medical documentation.
If you’re interested in taking out a home loan with one of these options, check with your lender in exactly what circumstances you can apply for the option and what conditions you must meet. For example, you may need to have held the loan for a certain period of time before you are eligible for the option, and it’s often limited to owner-occupiers, and not available on investment home loans.
RAMS offers its Lifestyle Option on most of its home loans including the popular RAMS Rate Relief home loan.
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