ASB Offers Senior Customers Home Equity Release Loans

ASB is the first major New Zealand bank to offer senior customers home equity release loans.

Also known as reverse mortgages, these loans are specifically suited to people older than 65 years of age, and enable asset rich but cash poor home owners to borrow money against part of the equity they have in their home.

While borrowers can repay all or part of the loan at anytime, normally the loan and outstanding interest is recovered by the bank when the home owner sells the property, or from their estate.

“We are introducing HomePlus in response to demand from our senior customers,” said Catherine McGrath, Chief Executive, Customers Markets and Products.

“In Australia home equity release loans are becoming more common, but until now have been offered in New Zealand by mainly specialist lenders.

“ASB is committed to setting the highest possible standards to ensure the protection of our customers.

“HomePlus complies with the voluntary code of practice developed by the Office of Senior Citizens. We will also set new ethical standards, particularly around ensuring borrowers fully understand the arrangement into which they are entering, providing guarantees around lifetime occupancy and promising people never have to repay more than the value of their property.

“The 90 day cooling off period also ensures borrowers who change their minds can repay their HomePlus loan.

“This type of borrowing is not for all senior customers, and we recommend it only for those customers who have no other means of accessing cash.

“Releasing funds from other assets if available will invariably be a better option than taking out a home equity release loan.

“However, for those who do not have other options it can allow them to maintain an independent lifestyle, stay in their own home longer, or undertake necessary repairs that are otherwise beyond their financial means.

“Before a borrower will be able to obtain an ASB HomePlus loan they will go through a three meeting process to ensure this type of loan is right for them. Through the process we will ensure the senior borrower understands the extent to which their debt will increase over time, and that they must seek independent legal advice. We also strongly recommend that family and other advisers are fully informed of their intentions.

“The interest rate we will charge for loans HomePlus is 7.75 percent per annum. This rate incorporates the cost of funding the loans, the risk factor, the guarantees provided and the length of time the money will usually be tied up without any repayment.

“The rate charged will be variable, and will fall and rise in line with ASB’s cost of funding HomePlus loans.

“HomePlus will only be available for homes owned in the name of individuals. Homes owned by trusts are not eligible because of the complications created by enduring trust ownership.

“ASB’s entry into the home equity release market will see this product come of age in New Zealand.”