How CommBank’s Home Loan Compassionate Care can help borrowers dealing with death and illness
CBA will cover 12 months of mortgage repayments to owner-occupier borrowers if they or a family member die or fall terminally ill.
The Commonwealth Bank today announced a major new policy to help home owners struggling to make mortgage repayments because of terminal illness and death.
The policy is called Home Loan Compassionate Care and will be delivered in partnership with insurer AIA Australia.
How does it work?
According to CBA, Home Loan Compassionate Care is "complimentary protection" that "helps support you by paying your home loan repayments for around 12 months if you, your spouse or dependant passes away or is medically certified with a terminal illness."
Borrowers facing the death of their spouse or child or a terminal diagnosis can download the relevant form (there's one for death and another for terminal illness) on the bank's website and either submit it via mail or at a branch.
Quick facts about Home Loan Compassionate Care
- New or existing CBA customers can apply for Compassionate Care
- You need to have an owner-occupier loan (no investors) such as the Extra Home Loan or Fixed Rate Home Loan.
- Eligible borrowers and their partners must be aged between 18 and 59, while dependant is defined as a child aged 18 or younger.
- If your claim is approved, the insurer (AIA Australia) will pay CBA an equivalent of your monthly mortgage repayments for up to 12 months.
- The insurer makes the final assessment on your application.
How does CommBank's policy stack up to other hardship policies?
ANZ, NAB, Westpac and CBA all have similar hardship assistance programs for people struggling to make repayments.
In most cases, you need to apply via your bank's website and enter some details about your loans, savings and financial situation. A hardship officer from the bank will work with you to get a repayment plan together and offer financial advice.
Your loan repayments may be adjusted and you may be able to negotiate a temporary repayment holiday. But you'll be expected to repay the full loan amount later.
What makes CommBank's Home Loan Compassionate Care program unique is that it's highly specific and aimed at one type of customer experiencing a specific problem. The generosity of the program is also worth noting. A bank covering 12 months of mortgage repayments is a pretty big deal. Let's say you borrowed $400,000 over 30 years with an interest rate of 3.00%. Your monthly repayments would be around $1,687. Over 12 months, that's $20,244.
More lenders should look at implementing policies like this one. Even the most diligent borrower can find their mortgage repayments derailed by illness and death. This is especially true at the moment, with many Australian borrowers taking on increasingly large mortgages.
"We know that mortgage repayments are the single biggest financial commitment for Australian homeowners, so when the unthinkable happens we'll support our customers by making their home loan repayments for around 12 months at no cost," said CBA Group Executive Retail Banking Services Angus Sullivan.
Recent CBA research found that a third of all Australian borrowers could cover only six months of mortgage repayments if they or their spouse died or fell terminally ill.
Mortgage stress is undoubtedly on the rise. A recent household survey from Digital Finance Analytics found that 32.8% of Australian households now suffer mortgage stress. As property prices look set to rise in coming months, more Australians will undoubtedly struggle with unaffordable mortgages.
Need help with your home loan?
If you're struggling with your mortgage and aren't eligible for the Home Loan Compassionate Care program, there are a few actions that might help:
- Review your spending. Take a careful look at your spending and look for areas where you can cut back.
- Review your interest rate. If your home loan rate is higher than average, you're paying more interest than you need to be. Compare rates and refinance to a better deal and you could save a lot.
- Talk to a financial counsellor. The National Debt Helpline offers free financial counselling. The phone number is 1800 007 007.
- Contact your lender. If you're unable to make repayments, then you'll eventually need to work with your lender and come up with a plan to get back on track.
If you're worried about an accident or illness affecting your income, then you can also consider income protection insurance. This is a form of insurance popular with borrowers because it can help with mortgage repayments while you're out of work.