ASB has introduced a new payment to cover mortgage interest costs for one year if a joint borrower dies.
ASB Bank has partnered with AIA to provide a 'Compassionate Care' payment. It is designed to help reduce short-term financial impact on borrowers who find themselves unexpectedly left to pay the mortgage.
ASB executive general manager of retail banking Craig Sims, said that the payment is available to the bank's new and existing mortgage customers aged under 65. If a joint borrower dies, the mortgage interest amount will be covered for 12 months.
“We know that mortgage repayments are one of the biggest financial commitments for most homeowners, so in case the unexpected happens, we want to provide our customers with peace of mind and some breathing space during an incredibly difficult time, so they can focus on what’s important,” Sims said.
From Monday, around 160,000 ASB customers will automatically become eligible. For customers who find themselves in this situation, a dedicated support team will proactively contact them and arrange the payment on their behalf.
"Having to worry about financial stresses when someone you love passes away is the last thing we want people to be doing, so we hope this provides some reassurance and support,” Sims added.
The benefit pays the interest amount, calculated as a portion of the existing loan, for 12 months. Funds are deposited into a nominated loan funding account. For example, for a joint borrower who has a mortgage of $400,000 on an owner-occupied property at an interest rate of 4 percent, the amount they could expect to receive under the Compassionate Care benefit is $1333.33 per month.
"We’ll pay $1333.33 into their loan funding account regardless of what the term of the home loan actually is.
"If the customer wanted to continue as before, [based on a 30 year term] they’d need to deposit $576.67 per month ($1910-$1333.33) into their account," Sims said.
As payments are to eligible borrowers, to a maximum of $60,000 per year, the benefit isn't a substitute for insurance cover.
"It is not comprehensive enough to be a substitute for life, terminal illness, income or mortgage protection insurance.
"Customers must seek appropriate financial advice to ensure they are well equipped to coping should the worst occur," Sims added.
The benefit is available to new and existing ASB mortgage customers from Tuesday.