Can the bank stop you from selling?

[srv]

Hey all, a little advice required here.

Situation: Bank doesn't like us at the moment as we borrowed as much as we could a wee while back when the grass was greener.

Went to bank last year as wanted to put everything to interest only to improve cash flow, to which they said sure let us know when you want to do it. 3 months later we decided to do it and contacted bank, who then dragged it out for another month & said "no due to policy change we will only allow that if you have 20% equity" and advised us to sell something & that they would then look at it.

So said fine, and stuck 2 properties we disliked the most on the market, just got a decent offer on one, so rang up bank to find out the break costs on the mort to which they said "don't sign anything the property we have the offer on has a higher GV & on paper it reduces our equity so they won't let us sell it"

What the hell is up with this. I worked it all out and if we use all the funds from the house we sell to pay off debt we become cash flow positive... FRUSTRATING.

So now he has to check with the finance team etc and said he would let us know in 2 days... which could stuff our offer.

Can they actually do this? As the property secures the debt, the offer is far higher than what we paid for it so will pay for it in full plus some left over to pay off other debt... Seems odd.

My theory is they are trying to drag it out as they are expecting a drop in rates so they can charge us more for breaking the loan...

[Kevynne]

Hi SRV, I am not sure if they can do this as I would think that they would like you to get your debt to them down. I would suggest you give the office of the Insurance & Savings Ombudsman a ring if you have not heard from the bank and ask them about your query. They are based in Wellington Ph 04-499 7612, or 0800 888 202 www.iombudsman.org.nz email [email protected] They helped me when I had problems with an insurance company that was very slowing in paying a claim. Good Luck.

[booyaah]

here is a link to one of Deans blog that more or less explains what the banks are doing http://massiveaction.tv/blog/special-finance-report

[srv]

Hi SRV, I am not sure if they can do this as I would think that they would like you to get your debt to them down. I would suggest you give the office of the Insurance & Savings Ombudsman a ring if you have not heard from the bank and ask them about your query. They are based in Wellington Ph 04-499 7612, or 0800 888 202 www.iombudsman.org.nz email [email protected] They helped me when I had problems with an insurance company that was very slowing in paying a claim. Good Luck.

Will give it a go if I don't hear back from the bank soon.

Is quite frustrating as we are playing their game and doing what they ask, then they turn around and say we can't do what they suggested...

[srv]

here is a link to one of Deans blog that more or less explains what the banks are doing http://massiveaction.tv/blog/special-finance-report

Thanks... But we don't want to take any money out, we actually want to dump any surplus onto other morts.

[sarahd]

I am assuming that if you sell and pay off some debt, that you will have a HIGHER LVR than what you have now with a "paper" value?

That is the only reason I am guessing they don't want you to sell?

[booyaah]

same thing, from what I understand is that since the recession some banks have changed their policies, if your LVR is high and you want to sell for debt relief or other reasons, the banks can keep the proceeds.

[srv]

I am assuming that if you sell and pay off some debt, that you will have a HIGHER LVR than what you have now with a "paper" value?

That is the only reason I am guessing they don't want you to sell?

Yes the one we are selling has a very high GV (unrealistic if you ask me) so on paper if we sell it makes our equity ratio look worse.

[Austrokiwi]

At least they are working with you .....though it may not seem like it. IF they are that uncomfortable with your position the other option they have is to tell you to front up with the cash required to return you to an 80% Loan ratio.

[srv]

same thing, from what I understand is that since the recession some banks have changed their policies, if your LVR is high and you want to sell for debt relief or other reasons, the banks can keep the proceeds.

What you mean keep the proceeds?

We want them to take the funds, pay off the mort on the property we are selling, then use the excess to pay off another mort we have with them.

[booyaah]

proceeds I meant whatever cash you had after sale, they would require to reduce your LVR to 80%, I hope you it all works out for you. cheers

[Dean@Massiveaction]

Can they do it SRV, yep they sure can. The banks are trying to push everybody to fit new criteria and in some cases your survival is secondary.
In one case recently my lawyer wrote to a lender saying their client would not be held liable for any losses if the property sold for less as they refused a very good offer. Vendor is in identical position to you.
You have to get it past credit departments who just tick boxes and if you are increasing their overall gearing they will probbaly say no. I hope I'm wrong for your sake.

[donna]

Umm maybe to increase cashflow you look at other options with the properties you have and your own personal income producing activities.

Cheers,

Donna

[Davo36]

SRV, have a read of your mortgage documents - I'm serious.

The bank can do almost anything they like.

All the best.

David

[Xav]

The bank can certainly refuse consent.

In one case recently my lawyer wrote to a lender saying their client would not be held liable for any losses if the property sold for less as they refused a very good offer. Vendor is in identical position to you.

I would take this approach, presuming the "not" in the middle of that sentence is a typo.

Here is a more complete version of the above. Reading that thread may be useful to you.