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AFG has released a new calculator that helps brokers explain to customers how repayment variations on their loans will impact their loan balances over time.
Following on from the release of COVID-19 financial assistance and relief packages from lenders, which include giving borrowers mortgage repayment holidays, aggregator AFG has now unveiled a COVID-19 Action Plan Calculator to help brokers outline the options available to their customers if their circumstances have changed due to COVID-19.
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The calculator enables a broker to show how different repayment options affect the loan balance, maturity date and monthly repayments.
Some of the scenarios that can be run through the calculator include:
- Paying the minimum loan repayment on a loan;
- Moving to interest-only repayments;
- Changing the monthly loan amount to a specific amount; and
- Pausing repayments completely for a period and the impact that will have when repayments start again.
Speaking to The Adviser about the new calculator, AFG’s head of sales and distribution, Chris Slater, said that the aggregator had developed the tool quickly to enable brokers to have “more informed discussion with their customers whose circumstances have changed as a result of COVID-19”.
He said: “Some lenders have been automatically giving borrowers a repayment holidays for six months, but our view is that – for a lot of the cases that we have come across our desks so far – that actually hasn’t been in the best interests of the customer.
“So, we wanted to create a tool that could help brokers clearly demonstrate what changing repayments or taking a repayment holiday would actually mean for the balance of the loan and give customers a clearer idea of how it impacts them.”
AFG’s head of sales and distribution added that “because a lot of customers don’t really understand how their different repayments will affect their overall loan balance on the term they have to repay on”, it also acts as an educational tool to explain repayments and loan structures more generally.
He continued: “We don’t want to have brokers providing advice on what options should be taken, because we think that’s between the customer and the lender. We just want to be able to clearly show the borrower what different scenarios do to the repayments over a certain time frame and what the balance of the loan would be after that period.
“The broker can also use the calculator to show borrowers that, once they have finished that relief period, how much they may have to pay in extra monthly payments to catch up and get back on track to the original loan term. Or, if they went back to minimum payments at the end of this term, how much longer they would have to pay their loan off for.
“It’s really just designed to be a conversation page between both parties,” he said.
As the calculator is downloadable as a PDF, Mr Slater added that brokers can save the working outs and print it out for their client, who can always use the calculator when having conversations with their lender about their options.
Mr Slater concluded: “The relationship between a broker and their customer continues to be strong, and at times like this the broker’s ability to work with their customer and their understanding of lenders and the available options are just as important as the assistance the broker provides a customer when considering a home loan choice.
“Our brokers have always worked hard for their customers and done what’s in their best interests. So, this is just another extension of that saying.
“We’re not telling the customer what to do, but we can certainly put the options in front of them and show them, with factual data, what some of the options might end up looking like for them. It is just another way a broker can add value to the customer.”
[Related: AFG, Purple Circle outline response to coronavirus]
