How does a pause work?

How does a pause work?

We have introduced a repayment pause for home loan customers impacted by COVID-19 and the current economic uncertainty.
  • You don’t have to make repayments for up to six months.
  • Interest will continue to be calculated in the normal way and will be added to your home loan balance during this pause period. As a result, the balance of your home loan will increase, which will mean you pay more interest over the life of the loan, and your repayments will likely need to increase.
  • We’ll be in touch before the end of the first three months to understand your current financial situation.
  • You can still make payments along the way, which will help repay interest charges and reduce your outstanding balance.
  • You can resume repayments or discuss restructuring your home loan (to reduce your repayments) at any point during the pause period.

Meet Sarah  - and find out how she decided.

Meet Sarah  - and find out how she decided.

How might the home loan pause impact my interest and repayments?

Meet Sarah. She has a home loan balance of $350,000, with 25 year term remaining, and a 3.60% p.a. variable interest rate, with a Flexible Home Loan with Member Package.

If she was paying principal and interest repayments:
  • After a three month pause, Sarah’s repayments will increase by $27 a month for the remainder of her loan
  • After a six month pause, Sarah’s repayments will increase by $55 a month for the remainder of her loan

If she was paying interest-only
  • After a three month pause, Sarah’s repayments will increase by $7 a month for the remainder of her interest only period
  • After a six month pause, Sarah’s repayments will increase by $22 a month for the remainder of her interest only period
Please note: At the end of your interest only period, your principal and interest payments will be calculated on a higher loan balance due to the interest added to your loan during the pause.

Does the pause impact my redraw?

You’ll continue to have access to your redraw during your repayment pause. However, keep in mind that during the pause period, your available funds for redraw will reduce as your loan balance increases (because repayments are not being made).

How to apply.

How to apply.

Call ME to discuss if a home loan repayment pause is suitable for you.

You can call ME on 13 15 63 (8am – 8pm Monday to Friday, 9am – 5pm Saturday AEST) to discuss if a home loan repayment pause is suitable for your situation or to discuss other support options.

Please note: We may ask you to provide us with information about your financial situation before a repayment pause is approved.

Options for resuming repayments.

Options for resuming repayments.

Below are five example scenarios to help you understand your options.

If you are currently on a home loan repayment pause and considering resuming repayments, these options will help you understand the impact to your home loan repayments and interest.

Please note all examples are based on Sarah who is an owner occupier and has a Flexible Home Loan with Member Package, with a variable interest rate of 3.60% p.a., and a home loan balance of $350,000 before her repayment pause. She paused her home loan for six months, and $6,330 in interest was added to her home loan, therefore making her new home loan balance $356,330.

To understand which options are available to you we’ll need to speak with you first. Please call ME on 13 15 63 (8am – 8pm Monday to Friday, 9am – 5pm Saturday AEST).

Option 1.

Option 1.

Increase your repayments over the life of your loan to cover your accrued interest.

If your financial situation has improved and you’re ready to resume repayments, you can resume at any time during your pause. The interest you’ve accumulated during your pause period, will be added to the balance of your loan, which will then increase your repayment amount over the life of your loan.

Sarah has been on a repayment pause and is ready to resume her repayments. At the end of her six month pause she will have accumulated $6,330 in interest. To repay this, her repayments would go up by $55 per month, from $1,771 to her new repayment amount of $1,826.

Please note: Your loan repayments will automatically resume at the same amount as before the pause, or if your rate has changed during the repayment pause, the amount we quoted on the rate change confirmation letter. We will recalculate your repayments at the end the pause, adding all interest charges to your loan balance, and give you at least 20 days’ advance written notice of your increased repayment amount before it takes effect.

How to resume repayments in internet banking

Option 2.

Option 2.

Change all or part of your loan to a fixed rate.

If you’re on a variable rate, you may be able to reduce your repayments by fixing all or a portion of your loan on a lower interest rate for one, two, or three years. If you are already on a fixed rate, you could move to a lower fixed rate, but a prepayment fee will apply. For some people this fee will outweigh the benefits of the lower fixed rate. Different rates will also apply depending on your circumstances and the fixed rate period you select. You will need to contact ME to find out the fixed rates that apply to your loan.

Sarah is on a variable rate, with an loan-to-value ratio of less than 90%, and wants to reduce her repayments by moving to a fixed rate. If she moves to a one-year fixed rate of 2.19% p.a. her repayments will decrease by $259 a month to $1,567, and she will save $5,896 in interest over the life of her loan.

Please note: Be sure to read our important information about fixed rates if you are considering this option.

Option 3.

Option 3.

Loan term extension.

You may be able to offset the impact of the repayment pause by extending the length of your loan term so your repayments decrease or return to what they were before pausing. Even though your repayments will be lower, in extending your loan term, you will take longer to pay off the total loan balance and will pay more interest over the life the loan than if the term is not extended.

Sarah started her home loan on a 28 year term and has been paying off her loan for the last three years. She wants to extend the term remaining on her loan from 25 years back to 27 years. Her repayments before the pause were $1,826, and after the loan term extension, her new repayments will be $1,740. This means her repayments will reduce, however, she will now pay $16,674 in additional interest over the life of the loan due to the term extension.

Option 4.

Option 4.

Redraw reduction.

Please note: This option is only available if you have a Basic or Flexible Home Loan product.

This option involves reducing your available redraw amount which will reduce your minimum repayment amount. The minimum repayment amount is calculated on the total loan balance for your loan – the balance owing and any available redraw you have. By reducing your available redraw, you are reducing your total balance owing and therefore your minimum repayment amount.

Sarah has $30,000 sitting in her redraw. She decides she wants to reduce her minimum repayments, so she asks ME to reduce her redraw to $0. Her repayments go from $1,923 to $1,826, saving her $97 per month. By reducing her repayments, she’ll now pay an extra $15,702 in interest over the life of the loan. Sarah had a redraw of $30,000 which means that she was on track to pay off her loan earlier than the contracted loan term. As she has chosen to reduce her redraw to zero and reduce her minimum repayments, she will no longer pay off her loan early. As a result, she will pay more interest.

Option 5.

Option 5.

Make interest-only repayments.

This would give you short-term repayment relief as you’ll only need to pay the interest charges for up to 12 months. When your interest-only period expires and your repayments revert to principal and interest payments, these principal and interest repayments will be higher than your current repayment amount as your loan balance will not have reduced during your interest-only period, and there will be a reduced loan term remaining to pay out the outstanding loan balance.

Sarah moves to interest-only repayments for a year, which means her repayments will decrease by $608 a month, going from $1,826 down to $1,217. At the end of the one-year interest-only period, her repayments would then increase to $1,874, which is higher than her original repayment. Her repayments will increase at the end of the interest-only period because she will need to start making principal and interest repayments on her home loan. An additional $6,400 in interest would be charged over the life of her loan.

Please note: Interest-only payment is approximate and will vary depending on the number of days in a month. The interest-only rate is higher than the principal and interest rate. In this example, we have used 4.10% p.a. You’ll need to call ME to discuss the rates that would apply to your loan.

What if I can’t resume?

What if I can’t resume?

If none of the above options are suitable for your financial situation, please call ME on 13 15 63 (8am – 8pm Monday to Friday, 9am – 5pm Saturday AEST) to discuss other ways we may be able to assist you during this time.