This significant financial support scheme was designed to cushion the impact of the coronavirus to help people not lose their homes in this difficult time.
The qualification criteria are yet to be finalised by the Government and the banks, but it's been promised that the scheme will suit many mortgage holders.
ANZ, BNZ, ASB, Kiwibank and Westpac are creating online application forms to process mortgage holidays. The banks are at different stages, but application forms are expected to be up and running by the end of the week.
Banks are expected to offer customers three month or six month mortgage holidays. Kiwibank says customers can choose a shorter break, or cancel their payment holiday if their circumstances change.
The Reserve Bank has confirmed the mortgage deferral scheme will be extended until March next year following the second Covid-19 prompted lockdown in Auckland. The scheme was due to expire on September 27, but has now been extended by more than six months amid the return of Covid-19 to the community and the recent outbreak in Auckland.
What exactly does a 'mortgage holiday' mean?
It's important to remember that six-month home loan deferral scheme or mortgage holiday package was designed to take the pressure off property owners, give them some breathing space by DEFERRING principal and interest payments, NOT writing them off. These deferred payments will end up being added on to the mortgage at the end. The interest on the debt will keep accruing even on "holiday".
How to explain this to tenants?
Every person is under a lot of pressure during the four-week lockdown. With some tenants misunderstanding the announcement about mortgage holidays, assuming that this means there are no costs to the landlords and so no rent needs paying.
If this happens to you, it is important to explain to your tenants that even if you're eligible to receive this support, costs won't stop just because repayments will. Your debts will keep accruing, and because mortgage repayments are pushed back till a later date, the costs will be even bigger in the long run because of accruing interest.
It is still a good initiative from the Government and will help those facing financial hardship as a result of the economic disruption caused by this virus.
If and when more information will become available, we will update you.