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With the unemployment rate forecast to reach a 26 year high, it's prudent to understand how to safeguard your mortgage and your credit history. 

When making financial decisions it’s always important to be informed but at times like this, when we are already stretched by a daily information overload, it’s crucial to work through the details and prepare as much as possible to protect your financial future.

The last thing you want is to make a panicked decision which has long term consequences without seeking advice from an expert.

As COVID-19 impacts more sectors, more people face potential changes to their income. Taking a repayment holiday is one avenue available to borrowers who find themselves under strain and here are some insights into what you need to know now, in case you need to take a repayment holiday later.

## 1. You can’t get a repayment holiday if you’re already behind on your payments

What you need to do now: If you are among the lucky ones whose income has not yet changed as a result of COVID-19, try to set aside a cash buffer in case your income changes suddenly.

Many Australian households live paycheck to paycheck but if you can, save some cash now so you don’t fall into arrears while organising your repayment holiday or restructuring your loan should things change quickly.

## 2. It’s a good idea to refinance proactively before you need to activate a repayment holiday

What you need to do now: Now more than ever, it’s a good idea to negotiate the best interest rate and loan package - and that’s much easier to do while you’re in a strong financial position. If you do then need to take a repayment holiday down the track, you’ll accrue less interest during that period and be better off when you start making payments again.

Getting a better rate doesn’t necessarily mean switching lenders, it may be as simple as asking your bank if they can reduce your rate or waive your fees. If your lender is not coming to the table, ask a home loan specialist for help.

## 3. A repayment holiday will increase the amount of interest you pay over the life of your loan

What you need to do now: Do some scenario planning so you have a clear picture of your situation and options if your income changes.

Taking a repayment holiday means interest and fees will continue to build up during that three or six month period and in many cases the length of your loan will be extended. Depending on the stability of your income, you may find switching your loan to minimum or interest only repayments is a better way to go in the medium to long term.

## Got a home loan question?
We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a [Home Loan Specialist here](https://www.lendi.com.au/book-appointment/). 

*The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.*

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