Can You Defer a Home Loan Payment? | How to Delay Your Mortgage Payments

If you’re struggling to make your monthly mortgage payments, you may be wondering if you can defer them. Deferring a mortgage payment means temporarily pausing your payments for a specified period of time. This can be a helpful option if you’re experiencing a temporary financial hardship, such as job loss or medical emergency.

However, there are some things to consider before you defer your mortgage payment. First, you’ll need to check with your lender to see if they offer this option. Not all lenders offer mortgage deferrals, and the terms and conditions can vary from lender to lender.

Second, you’ll need to understand the potential consequences of deferring your mortgage payment. Interest will continue to accrue on your loan during the deferral period, so you’ll end up paying more money in the long run. You may also have to pay a late fee or other fees.

Finally, you’ll need to make sure that you’re able to resume your mortgage payments after the deferral period ends. If you can’t, you could face foreclosure.

What is a Mortgage Deferral and How Does It Work?

Home loan deferral, also known as mortgage payment deferral or repayment pause, is a temporary arrangement offered by lenders to homeowners who are experiencing financial hardship and are unable to meet their regular mortgage repayments. It is designed to provide temporary relief to borrowers facing difficulties such as unemployment, reduced income, illness, or other financial challenges.

When a borrower requests a home loan deferral, the lender assesses their situation and may agree to temporarily suspend or reduce their mortgage repayments for a specific period. This allows borrowers to have a temporary break from making payments or pay reduced amounts during the deferral period.

The terms and conditions of home loan deferral in Australia can vary depending on the lender, loan type, and individual circumstances. Some key aspects to consider are:

  • Length of deferral: The deferral period can range from a few months to a year, depending on the agreement with the lender.
  • Accrued interest: Interest may continue to accrue during the deferral period, which means the borrower’s loan balance will increase.
  • Repayment arrangements: After the deferral period ends, the borrower is typically required to resume making regular repayments, including any missed payments. The missed payments may be spread out over an extended loan term or added to the monthly repayment amounts.
  • Credit reporting: Lenders in Australia generally report deferred payments to credit reporting agencies. While deferrals themselves are not negative listings, they may still impact a borrower’s credit history and ability to obtain credit in the future.

It’s essential for borrowers to proactively communicate with their lender and discuss their financial situation to explore the options available.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

3 Situations When Deferring Your Mortgage Payments May Be the Best Option

Deferring your home loan repayments is a serious decision that should not be taken lightly. However, there are some situations where it may be the best option for you.

Here are some of the times when you may want to consider deferring your home loan repayments:

If You Have Lost Your Job or Experienced a Significant Reduction in Income

This is the most common reason for deferring mortgage payments. If you are unable to make your monthly payments, deferring them can help you to avoid foreclosure.

If You Have a Medical Emergency or Other Unexpected Expense

If you have an unexpected expense that you cannot afford to pay, deferring your mortgage payments can help you to get back on your feet.

If You Are Going Through a Divorce or Other Major Life Change

If you are going through a major life change, such as a divorce or a job loss, deferring your mortgage payments can give you some breathing room to get your finances in order.

Deferring your mortgage payments will not solve your financial problems. It is only a temporary solution that can help you to get through a difficult time. Once the deferral period ends, you will still need to resume your payments.

If you are considering deferring your mortgage payments, you should talk to your lender as soon as possible. They will be able to tell you if you qualify for a deferral and what the terms and conditions are.

Things To Consider Before You Defer Your Mortgage Payments

Here are some of the things to consider before you defer your mortgage payments:

  • How long will you need to defer your payments?
  • How much interest will you accrue during the deferral period?
  • Will you be able to resume your payments after the deferral period ends?
  • What are the fees associated with deferring your payments?

If you decide to defer your mortgage payment, be sure to keep track of your finances so that you can resume your payments on time. You should also make sure that you have a plan to repay the deferred payments in full.

Options To Consider If You Are Struggling To Make Your Mortgage Payments

If you are struggling to make your mortgage payments, it is important to get help as soon as possible. There are many options available to you, and you do not have to go through this alone.

Here are some other options to consider if you are struggling to make your mortgage payments:

  • Refinance your mortgage: If you can get a lower interest rate, refinancing can help you to save money on your monthly payments.
  • Get a loan modification: A loan modification is a change to the terms of your mortgage that can make your payments more affordable.
  • Work with a housing counselor: A housing counselor can help you to explore all of your options and develop a plan to get your finances back on track.

How Much Interest Will I Be Charged If I Defer My Home Loan Repayments?

Yes, you will still be charged interest on your home loan even if you defer your repayments. This is known as interest capitalisation, and it means that the interest that accrues during the deferral period will be added to the principal balance of your loan. This will increase the amount of interest you will ultimately pay on your loan.

For example, if you have a $300,000 home loan with an interest rate of 5%, and you defer your repayments for 6 months, you will be charged $7,500 in interest. This interest will be added to your principal balance, bringing your loan balance to $307,500. When you start making repayments again, you will be paying interest on the higher balance, which means that you will pay more interest overall.

It is important to weigh the pros and cons of deferring your home loan repayments before you make a decision. If you are struggling to make your payments, deferring them may help you to avoid defaulting on your loan. However, you need to be aware of the fact that you will still be charged interest, and this will increase the amount of debt you owe.

Pros And Cons Of Deferring Your Home Loan Repayments

Deferring your home loan repayments can be a helpful way to manage your finances if you are facing financial hardship. However, it is important to weigh the pros and cons before making a decision.

Pros of Deferring Home Loan Repayments

  • Financial relief: If you are struggling to make your mortgage payments, deferring them can give you a brief period of financial relief. This can help you to avoid defaulting on your loan and damaging your credit score.
  • Time to reorganise your finances: Deferring your repayments can give you some time to reorganise your finances and get back on your feet. This could involve finding a new job, paying off other debts, or making a budget.
  • Avoiding foreclosure: If you are at risk of foreclosure, deferring your repayments may help you to avoid losing your home.

Cons of Deferring Home Loan Repayments

  • Interest capitalisation: When you defer your repayments, you will still be charged interest on your loan. This interest will be added to the principal balance of your loan, which will increase the amount of interest you will ultimately pay.
  • Lengthening your loan term: If you defer your repayments, you will need to repay your loan for a longer period of time. This means that you will pay more interest overall.
  • Damage to your credit score: If you defer your repayments, it could damage your credit score. This could make it more difficult to get a loan in the future.

How To Calculate The Interest You Will Be Charged During The Deferral Period

To calculate the interest you will be charged during the deferral period, you will need to know your loan amount, your interest rate, and the length of the deferral period. You can use the following formula to calculate the interest:

Interest = Loan amount * Interest rate * Deferral period

For example, if you have a $300,000 loan with an interest rate of 5%, and you defer your repayments for 6 months, you will be charged $7,500 in interest.

How To Minimize The Impact of Deferring Your Home Loan Repayments on Your Credit Score

Deferring your home loan repayments can have a negative impact on your credit score. However, there are a few things you can do to minimize the impact:

  • Only defer your payments if you absolutely need to. If you can avoid deferring your payments, it will be better for your credit score.
  • Defer your payments for the shortest possible period of time. The longer you defer your payments, the more it will damage your credit score.
  • Resume making on-time payments as soon as possible. Once you are able to resume making on-time payments, your credit score will start to recover.
  • Pay down as much debt as possible while you are deferring your payments. This will help to improve your debt-to-income ratio, which can also help to improve your credit score.
  • Keep your credit utilization low. Your credit utilization is the percentage of your available credit that you are using. Try to keep your credit utilization below 30%.
  • Make sure you have a good credit history. If you have a good credit history, deferring your payments will have less of an impact on your credit score.
  • Talk to your lender. Your lender may be able to offer you a different repayment option that will not damage your credit score as much.
  • Get a copy of your credit report. This will allow you to see how deferring your payments has affected your credit score.
  • Dispute any inaccurate information on your credit report. If there is any inaccurate information on your credit report, dispute it immediately.
  • Be patient. It takes time for your credit score to recover after deferring your payments. Be patient and continue to make on-time payments, and your credit score will eventually recover.

By following these tips, you can minimize the impact of deferring your home loan repayments on your credit score.

Refinance With Odin Mortgage To Avoid Deferral And Save Money

Are you struggling to make your home loan repayments? Refinancing your home loan could be a solution. By refinancing to a lower interest rate, you could save money on your monthly payments. This could give you the financial relief you need to get back on your feet.

Contact Odin Mortgage today to learn more about our refinancing options. We can help you determine if refinancing is the right option for you, and we can help you get the process started.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Frequently asked questions

A home loan payment deferral is a temporary pause in your mortgage payments. This means that you will not have to make your monthly mortgage payments for a certain period of time. However, the missed payments will be added to the end of your loan term, so you will have to pay them back eventually.

Eligibility for a home loan payment deferral will vary depending on your lender’s policies. However, in general, you may be eligible for a deferral if you are experiencing financial hardship due to a job loss, illness, or other unexpected event.

To apply for a home loan payment deferral, you will need to contact your lender and explain your situation. Your lender will then assess your eligibility and make a decision.

Odin Mortgage Logo
Featured In
Geo Expat Logo
Asia xpat Logo
Expat.com Logo
Expat Living Logo
AAHK Logo
Easy Expat Logo
FREE GUIDE

10 Best Tips for Australian Expats to Maximise Borrowing Power & Approval Success