~ M O R T G A G E ~
Last year the government has advised they will do all they can to help everyone, but couldn't save every business or every job.
Last Year all of the banks along with the Reserve Bank and the Finance Minister were combining to provide relief for mortgage holders, these will include solutions to assist with you during lockdown and the potential reduction or loss of income during this period.
Last year the Government has advised that mortgage holders will be able to apply for a 6 month Mortgage Holiday through their bank and now banks have put their systems in place to enable this to happen. This created a lot of strain on the banks and it resulted in applications taking time to process.
There options were:
Reduce your repayments to the minimum amount required, applicable if you are currently paying more than the minimum amount.
Apply for interest only repayments, this is where your repayments are reduced by the amount of principal repayment. After the interest only period your repayments will increase to repay the home loan over the remaining term.
Apply for a mortgage repayment holiday. Interest will continue to be accrued during this time and added to the home loan.
This time around we haven’t heard of any specifics to date on whether there would be similar actions taken or any announcements from the Government.
At this stage, we know that banks are processing things internally, and some do have options such as a Mortgage Repayment Holiday, repayment deferrals, or moving to an interest only period on a case by case basis.
Again it will take time to process so make sure you contact your bank early to get the process underway, if you think you need to.
The below links to the various bank websites will be able to provide more detailed information, and we will update our Facebook Page to provide further updates. https://www.facebook.com/wealthhealthnz/
Government COVID 19 site: https://covid19.govt.nz/
The central location for all information relating to the Virus in New Zealand. Under the Help & Advice tab there is all the information that the Government is doing financially to help out.
Each bank has a different site for customers to learn about their response to COVID 19. Along with information each bank will have their links to help out with Mortgage Repayment Holidays
Settlements, Loan Documents
House sales and settlements have been deferred to after the lockdown period, or until Alert Level 4 is reduced to level 2.
If you are purchasing a house, or wanting to apply for a home loan, some banks would not be able to assist due to not being able to verify your Identify until their branch network re-opens and you can turn up in person. However some lenders can do this in house, or some lenders we deal with have work around solutions for this.
~ I N S U R A N C E ~
For our customers who currently have Personal Life Insurance policies with us.
Most of our customers have their policies with either Partners life, AIA (Old Sovereign) or Asteron.
All of these insurers have confirmed that existing policy holders are covered in the event of a claim relating to Covid-19.
However for new customer applications, some of these insurers are no longer accepting applications for Redundancy cover due to the unknown risks associated with Covid-19. Also we are seeing one of these insurers limit the type of income protection policies to Mortgage Repayment Insurance and Household Expense cover, to what those actual obligations are.
All of the life insurance companies we work with do have policy suspension options, however only one insurer will still provide full cover for you if while on a policy suspension, the others will either cover Life and Trauma, and another nothing at all.
There are some qualifying criteria around this which in some instances require a 20% drop in income,
Other reasons for qualifying for temporary suspension of cover include
- Carer for Spouse, defacto partner, civil union
- Leave without pay
- Overseas travel (yea right)
- Parental leave
- Tertiary education.
So a note of caution, if you do wish to apply for this temporary suspension of cover, please contact us to arrange so we can discuss with you what your cover situation would be during a policy suspension. Not having cover would increase your household’s overall financial risk if you are not insured, and we are all at a higher risk of something awful happening in our health right now, so I’d recommend this is a last resort option in these uncertain times.
Insurance companies do change their premium structure over time, and while you are on lockdown, you may wish to contact us to review your Life insurance needs, and compare the cover you have, and the price you pay for it, with other insurance providers, this may be an option to help save money if your budget is being squeezed.
We are working remotely and we are open so we can schedule an online meeting with you. Don’t be afraid of the technology, its easy to use and we will guide you through it….click click done.
~ K I W I S A V E R ~
I am aware that most clients will be invested in Kiwisaver funds that have some exposure to the sharemarket, and that these balances will have fallen recently. If we have recommended Generate Kiwisaver to you, It is because I made the decision 5.5 years ago regarding which Kiwisaver provider, I felt was going to perform well when the sharemarkets were going down.
I come from an Investment Management background and I was providing advice to clients during the Global Financial Crisis where sharemarkets fell by 50%. I learnt from that experience that traditional fund managers have a lot of inflexible rules around asset allocation, associated with moving customers money around during volatile times.
I chose Generate Kiwisaver due to the fact that they didn’t have such inflexible rules compared to the investment background where I came from, as my view was that inflexible asset allocation rules were detrimental to my customers investment performance and also anxiety levels.
It has been an absolute fluke, that the Kiwisaver Provider I chose- Generate, has actually turned out to be one of the top 3 performers when measuring investment returns over the last 5 years when times have been good, so it’s not been excellent analysis and judgement on by behalf, and I don’t have a crystal ball, and unlike The Simpsons creator, Matt Groenig, I can’t predict the future. But can rely on historical trends to get an idea of how markets work.
Now I’m very interested to see how they compare based on returns when the markets are going down.
Generate Kiwisaver have advised me that leading up to the current Covid-19 related sharemarket fall, that they had been starting to reduce exposure to the sharemarket, and have more money invested in cash. So this was a direct example of their flexible investment management approach I mentioned above.
What this means for you is that Generate’s Growth fund performance will lose less money in the short term compared to growth funds that have an inflexible 90-100% allocation to shares, and in addition to that, when the market turns the corner, they will be in a better position to spot investment opportunities on your behalf, and make the most of the sharemarket recovery when it comes….and it will come, it just may take 12-18 months to happen.
In the meantime, keep contributing to kiwisaver if you can, because right now I suggest that you are picking up shares at a significant discount level.
The old adage in the investment game is Buy Low and Sell High, well here is the low.
Kiwisaver is there for your retirement, and for most of my clients that is a fair way down the track of 10-15+ years. Your investment funds will recover in value, and also there may be something else in the future that gives your fund a bit of a knock.
Just because your Kiwisaver is available to withdraw at the age of 65, doesn’t mean you have to. You can leave your funds invested in there indefinitely, so your investment time frame can be even longer as it is managed well through retirement, while giving you the ability to withdraw what you need at any time.
With that being said, there are some options where you can access some of your retirement savings under Financial Hardship criteria.
The application process for that generally requires you to complete a hardship withdrawal form. Now don’t expect to be able to access it all. Typically they will release enough to see you through to cover any gaps in your income and expenses for 3 months, then if more hardship funds are required, then another application process is usually required.
Kiwisaver funds are also accessible under a Serious Illness withdrawal process, and with Covid-19 this is relevant. I haven’t completed one of these withdrawals for clients previously but I’ll be here to guide you through and figure it out as we go. I suspect it will require another form, plus a letter from the Doctor.
Still there, phew riiiight?! Thanks for reading through, keep safe and we are all hoping for our nation to heal!
Cheers from Craig, Fiona, Stuart, Roszarri, Jared, Talia and Tiggy!