As a home owner, so much of your income is likely to be channelled towards your home loan balance that you probably daydream about a time when that proportion of your income will be yours to use. Maybe even a couple of months with no home loan repayments would make a nice difference to your cash flow

These are exactly the kind of thoughts that banks such as National (NAB) would probably like you to be having. Repayment holidays are offered by many banks and lenders, including NAB, and are often marketed as a relaxing break away from the stresses and routine of regular home loan repayments. But its not the case.

To be eligible for an NAB home loan repayment holiday, you must have made enough in extra repayments to cover the repayments you will miss on your holiday. Which begs the question why would you work so hard to make extra repayments only to whittle away the extra by taking a few months off?

If you are approved to take a holiday from your nab home loan repayments for around three to six months, your cash can be used towards other expenses, but the interest on your home loan will still accumulate. This means your debt will increase during the period of your repayment holiday.

In addition to increasing your debt to NAB through interest, there is a chance that the way you use your extra cash during the repayment holiday could increase your total debt. For example, if you used the extra money to buy a car, or an item that does not increase in value or produce income, you are adding to your total debt. Without a repayment holiday, you dont have the chance to temporarily increase your cash flow, but you can rest in the knowledge that your money is being used towards clearing your NAB home loan debt.

If you think you may have trouble making any of your home loan repayments, speak to your financial broker and NAB representative as soon as possible. There may be solutions available that you are not aware of, such as freeing up more of your cash flow by consolidating your debts. With the extra money you could save by doing this, you could save up for a real holiday rather than increase your debt with a repayment holiday.