PROPERTY

Ask Paul: Is there any truth to this COVID-19 property rumour?

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Hi Paul, I have heard a rumour that if you ask your bank for the six-month break from your mortgage because of COVID-19, and then you need further assistance down the track, this will not be available as you will already be considered "in default".

My young friend has recently purchased a unit; but he now finds himself unemployed and with no tenant.

The six-month break seems a good idea, but now he is not so sure because of the rumour. What are your thoughts? - Debra

paul clitheroe

There are some cracking rumours going around, as is always the case when we are a bit on edge and uncertain.

The very best thing your young friend can do, Debra, is to go straight to the source and have a good discussion with the bank.

All too often, a lender is the last person we talk to.

At times I can understand this, but if we look at the bank's position, your friend has quite a bit of power. The bank does not want to foreclose on him at any stage. In this market, a mortgagee sale is likely to see the bank losing money. It would hate that.

In particular after their bashing at the royal commission, banks evicting people and selling them up would be a disaster for them during a pandemic.

So I'd get him to set out all the facts, including his income from JobSeeker or JobKeeper if available to him, and have a conversation with his bank about the help available and what happens after the six months.

I am sure he will find that an open, co-operative attitude to the problem will give him the best chance of a positive outcome.

We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.

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Paul Clitheroe AM is a respected financial adviser and Money's founder and editorial adviser. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
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