Deferrals likely to cost homeowners — REINSW

By Gerv Tacadena

While banks are waiving repayments, borrowers still need to pay the accumulated interest over the repayment holiday

Homeowners who ended up taking the deferral offer from their banks will end up paying more in interest over the life of their loan, according to the Real Estate Institute of New South Wales (REINSW).

REINSW CEO Tim McKibbin said the bank is poised to profit from the deferral scheme, and property owners, particularly those who own a rental property, will bear the brunt.

"The bank's selfless action, to offer a deferment of the monthly repayment, comes at a substantial cost. Landlords will still pay and pay it all, just a bit later on," he said.

Also read: How to meet your mortgage repayments during COVID-19

McKibbin said the majority of landlords are mum-and-dad investors who own just one property.

"The landlord is subsidising the tenant's occupation of their property with real money, and if they take up the bank's offer, paying for the privilege. The landlord also holds another unique position in this equation — the landlord is least financially capable to provide the assistance," he said.

The table below shows how much additional interest will be charged for a loan payment deferral of 6 months for a mortgage with an interest rate of 6.5%:

Homeowners who ended up taking the deferral offer from their banks will end up paying more in interest over the life of their loan.

 

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