The new coronavirus variant is raging in Hong Kong, and the number of confirmed cases in a single day continues to hit new highs. The situation is worrying. In order to ease and help customers cope with the challenges caused by economic uncertainty, a large bank announced that it has extended the application deadline for "interest-free principal repayment" to October 31 this year, and the application qualifications have also been relaxed.

In fact, since the early days of the COVID-19 outbreak, that is, in early 2020, banks have launched a number of financial service support measures to ease and help customers cope with the challenges brought about by economic uncertainty, including providing services to eligible small and medium-sized enterprises, industrial and commercial enterprises and residential customers are provided with an "interest-free principal repayment" plan. In view of the worsening of the epidemic in recent months, some major banks have announced that they have extended the application deadline for "interest-free principal repayment" to October 31 this year. The application qualifications have also been relaxed, from the requirement that they have made contributions for at least 6 months in the past to 3. months.

The "interest-free principal" plan is a loan arrangement that defers principal repayment. The borrower must meet the specified application conditions of the plan. After approval, the borrower does not need to repay the principal during the specified period (usually 6 to 12 months), only the interest. After the specified period, the borrower must resume normal monthly payments until repayment. All principal and interest.

For mortgage customers, when the customer fails to repay the loan on time (usually for 3 consecutive months), the bank will treat the owner as having violated the mortgage contract, and the bank has the right to "Call Loan" the owner. If the owner fails to repay the loan, the bank can Apply to repossess the unit and put it up for auction or sale. If you suddenly become unemployed and have problems with your mortgage payment, and you don’t want to delay repayment and worsen your credit rating, “paying interest without paying back the principal” is definitely a good way to solve the problem in an emergency.

Assume that Mr. Chen borrowed NT$6 million from the bank 5 years ago, with a payment term of 20 years, an interest rate of 1.5%, and a monthly payment of NT$28,953. Unfortunately, in the 6th year of making contributions, due to the economic downturn, Mr. Chen’s employer required him to take a leave of absence without pay. Facing the pressure of making contributions, Mr. Chen applied for a one-year "interest-free principal payment". The monthly interest payment is about 5,830 yuan, which reduces the monthly expenses by 28,953 yuan - 5,830 yuan = 23,123 yuan, or nearly 80% of the expenses. The principal and interest for that year will be deferred to the next year, and the interest expense for the entire period will increase by 5,830 yuan x 12 months = 69,960 yuan.

Mortgage "repayment of interest but not principal" can solve the urgent needs of property owners. It can also help stabilize the development of the property market and reduce the chance of lenders taking over, which is a positive help to the Hong Kong property market. However, the plan will also increase the owner's total interest expenses. Owners should evaluate the stability of their occupation and type of work. If their income does not improve after the specified period, they may need to consider selling the property to repay the loan.

Article source: NOW Finance