An asset management company from Australia, Pepper Asset Servicing, intend to launch a ‘split mortgage’ product to mortgage borrowers who are struggling to keep up with repayments
Pepper, who recently acquired GE Woodchester’s home loan book contains around 3,500 sub-prime mortgages, said it is to offer borrowers the option of availing of a ‘split mortgage’. This new type of mortgage product takes your current loan and splits into two parts. The main part, which is determined by the current state of their finances, continues to be repaid as per normal.
The amount left over is then ‘parked’ aside while the repayments on the other portion are being made. While other lenders considering the idea of offering split mortgages are planning to still charge interest on the entire amount borrowed, Pepper won’t be charging interest on the ‘parked’ portion of the loan. And this is not the only incentive the Australian lender will offering potential borrowers who move to them.
Pepper will reduce the split balance by contributing 5% of uninterrupted annual repayments toward the main balance. Should any customer want to pay off more than their repayments in a year, the bank will reward you by contributing 20 per cent of the total annual overpayment as credit against the split balance. However, not everyone will be accepted for a split mortgage from the company.
Every applicant is assessed for eligibility on a case-by-case basis and those who have been accepted will have their account reviewed every 3 years to see if their financial situation has changed.