CBA Holidaymakers, Consider Your Alternatives First

The word holiday has a different meaning for all of us. To some, a holiday consists of five-star hotels, designer shopping sprees and luxury yachts, while to others a holiday involves simply a good book and a deck-chair underneath a beach umbrella. To banks and lenders, a holiday is a chance to make money in the form of home loan repayment holidays.

The Commonwealth Bank offer a repayment holiday option on several of their home loan and investment home loan products; however, repayment holidays are not available on the Commonwealth Bank's fixed rate loans, interest only loans, Viridian Line of Credit loans or Colonial banking products.

The idea behind a repayment holiday is that if you have made extra repayments towards your loan, a facility which is offered by some, but not all, Commonwealth Bank home loans, you can apply to take a break from your regular repayments.

To be eligible for a repayment holiday, you need to have previously made enough extra repayments on your home loan, and you must meet Commonwealth Bank's approval criteria.

If eligible, you can use your extra repayments to cover your loan repayments for a period of between 3 and 12 months. For each month of this period, your regular payment amount will be deducted from the balance of your additional repayments. This means you will have a temporary increase in your cash flow, as the amount that would usually go towards your home loan repayments is available to use on other expenses.

Everyone loves a holiday, right? Not necessarily when it comes to Commonwealth Bank's repayment holidays. The interest that you would usually pay per month is added to the balance of your loan, so you don't get a break from interest charges. This also means that your regular repayment amount will increase once you return to your usual payment routine, in order for you to pay the loan back within the term you originally agreed to. So, although you get a reprieve from payments during your repayment holiday, it will cost you further down the track.

There are alternatives to applying for a Commonwealth Bank repayment holiday. For example, if you have made additional repayments and find yourself needing a boost in cash flow, you may be able to access your extra funds through a redraw facility while you continue to make your usual repayment.

If you think you may have trouble making any of your loan repayments, it's important to seek advice as soon as possible before you default on a payment and have a negative impact on your credit history.