The holiday you should think twice about taking…

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Over the weekend I was chatting to a neighbour (over the fence) and we got talking about the mortgage holiday that you are now able to apply for as a homeowner. What I found hugely refreshing was that my neighbour had gone direct to his business banker and had been advised not to go ahead with the repayment holiday at the moment because the business wasn’t in a position where it needed it. That’s not to say that it wouldn’t be in the future, but right now wasn’t the time.

The government initiatives through this tough time have been proactive and well put together. They’ll significantly soften the impact on homeowners and business owners over this time and that side of things is commendable. However, how much it helps will depend on the way in which it is used.

A few of the banks have now closed the door to “new to bank” customers. Meaning they are focusing all their energy on existing customers who are experiencing distress. But what does distress mean? Who’s assessing whether there is distress? In a lot of cases, I would say the customer is being left to make that decision for themselves.

At the moment, as a home owner you have a few options and one of those is that you can apply for a home loan repayment holiday. On the face of it, this sounds great. A six month break off paying your loan! That’s awesome…. But there’s more to it than that and you need to be extremely careful not to get caught out simply taking the offer because it’s there. In the words of Oliver Cromwell “keep your powder dry”. You don’t want to go into battle only to find out you’ve used all your ammunition in training and have nothing left to fight with.

If you’re looking at the home loan repayment holiday as an option to ease some pressure, then I’d suggest making sure you get some advice first. If after that you do go ahead, then use it wisely. Having a repayment holiday doesn’t mean spending the extra cash somewhere else. A lot of people will fall into that trap which is why more than half of the population are living pay-check to pay-check. If you can, then save it. Keep it in an account so that if/when you need it, it’s available.