Mortgage fine print costs mint
By ROB STOCK - Sunday Star Times | Sunday, 18 January 2009
Bbreaking a fixed-rate loan may cost a bundle, but the terms and conditions of home loans mean the banks are now able to force immediate repayment of a large proportion of the country's home loans.
The smallprint in bank mortgage terms and conditions gives them huge leeway to require immediate complete, or partial repayment, of home loans.
There are six situations covered by bank mortgage documents that allow the banks to exercise this right and seem to allow the banks wide discretion in their interpretation.
Some banks give themselves unfettered power to demand repayment for no reason at all.
1: The one that should currently frighten home- owners is the plunging house values clause. For example, the BNZ's home loan terms and conditions say it may act if "we think that the securities we hold have significantly devalued".
The bank's italics make it clear that it reserves the right decide when it thinks it is time to act.
2: Wide catch-all clauses allow the bank to require immediate repayment of all or part of a loan. Kiwibank's for instance, reserves right to demand immediate repayment, if "something happens (whether by your actions or not) that we think impacts adversely on your ability to continue meeting your home loan obligations, or any guarantor's ability to meet its guarantee obligations".
That would appear to cover redundancies, serious illness, the bankruptcy of a guarantor - although again, the "we think" leaves the bank with sole discretion in making the decision. TSB's allows the bank to call up the loan without having to have a reason.
3: There is usually a clause that says a home loan can be called in if a borrower fails to meet any condition of the loan. That can include keeping the place insured, rates paid up to date and in decent nick.
4: Borrowers won't be surprised to learn that should they miss any repayments, the bank can call in their whole loan. But it's less well known that some loan terms and conditions allow banks to call in a loan should a borrower fail to meet any other obligation to the bank.
For example, the BNZ's says it may do so if "you default in paying money due to us, whether under this agreement or otherwise".
That could include a separate loan like a mortgage on an investment property, or a credit card, or personal loan.
5: Another wider clause that sometimes appears is one requiring borrowers to comply with all property laws.
For example, Kiwibank also has this: "You must comply with all laws that affect you and your property."
6: The bank discovers you have lied to them in your application. This is the "fraud" clause in mortgage terms and conditions.
Unlike borrowers wanting to break the terms of fixed-rate loans, banks do not suffer penalties for calling in a borrower's loan. In fact, they reserve the right to charge the costs of pursuing the immediate repayment to the borrower.
http://www.stuff.co.nz/4822477a13.html
By ROB STOCK - Sunday Star Times | Sunday, 18 January 2009
Bbreaking a fixed-rate loan may cost a bundle, but the terms and conditions of home loans mean the banks are now able to force immediate repayment of a large proportion of the country's home loans.
The smallprint in bank mortgage terms and conditions gives them huge leeway to require immediate complete, or partial repayment, of home loans.
There are six situations covered by bank mortgage documents that allow the banks to exercise this right and seem to allow the banks wide discretion in their interpretation.
Some banks give themselves unfettered power to demand repayment for no reason at all.
1: The one that should currently frighten home- owners is the plunging house values clause. For example, the BNZ's home loan terms and conditions say it may act if "we think that the securities we hold have significantly devalued".
The bank's italics make it clear that it reserves the right decide when it thinks it is time to act.
2: Wide catch-all clauses allow the bank to require immediate repayment of all or part of a loan. Kiwibank's for instance, reserves right to demand immediate repayment, if "something happens (whether by your actions or not) that we think impacts adversely on your ability to continue meeting your home loan obligations, or any guarantor's ability to meet its guarantee obligations".
That would appear to cover redundancies, serious illness, the bankruptcy of a guarantor - although again, the "we think" leaves the bank with sole discretion in making the decision. TSB's allows the bank to call up the loan without having to have a reason.
3: There is usually a clause that says a home loan can be called in if a borrower fails to meet any condition of the loan. That can include keeping the place insured, rates paid up to date and in decent nick.
4: Borrowers won't be surprised to learn that should they miss any repayments, the bank can call in their whole loan. But it's less well known that some loan terms and conditions allow banks to call in a loan should a borrower fail to meet any other obligation to the bank.
For example, the BNZ's says it may do so if "you default in paying money due to us, whether under this agreement or otherwise".
That could include a separate loan like a mortgage on an investment property, or a credit card, or personal loan.
5: Another wider clause that sometimes appears is one requiring borrowers to comply with all property laws.
For example, Kiwibank also has this: "You must comply with all laws that affect you and your property."
6: The bank discovers you have lied to them in your application. This is the "fraud" clause in mortgage terms and conditions.
Unlike borrowers wanting to break the terms of fixed-rate loans, banks do not suffer penalties for calling in a borrower's loan. In fact, they reserve the right to charge the costs of pursuing the immediate repayment to the borrower.
http://www.stuff.co.nz/4822477a13.html
Comment