Mortgage clause on property re-valuation

Discussion in 'Loans & Mortgage Brokers' started by NCB, 23rd Sep, 2020.

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  1. NCB

    NCB New Member

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    Hi, we have bought a house and while processing the loan documentation noticed the attached clause in our loan agreement. This seems to state that the bank can value our property at any time during life of mortgage and come back to us for additional repayment, security or LMI if value falls. Upon reaching out to the sales rep, she clarified that re-valuation occurs only if there are arrears in financing OR if we come back for top up/re-financing. However, the loan agreement doesnt mention these conditions. Is this standard business practice or has anyone encountered this before ? Would you proceed with the agreement with attached clause?
     

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  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    It's not standard practice to my recollection. I've just taken a glance at the loan documents for 5 different lenders, I can't find any similar clause to this.

    The default rate is fairly standard, but revaluation clauses aren't in residential loan contracts. I did initially think that this might be a commercial loan agreement, but the comments regarding LMI would suggest otherwise.

    A revaluation is always going to be required for a top up. Even if this was low, that wouldn't trigger the consequences as described, you just wouldn't proceed with the top up. If you are in arrears, all lenders have a process under which they reposes the property which would include a valuation as part of the sales process, but that's not going to happen within a few weeks.

    Which lender is this?
     
  3. NCB

    NCB New Member

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    Thanks Peter. Good to know. Yes it is a residential loan agreement. The lender is Easy Street. They are offering an incredibly good rate (1.95% var) but with this clause, I am very hesitant to sign !
     
  4. Lindsay_W

    Lindsay_W Well-Known Member

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    A prime example that rates should not be the only deciding factor when looking for a loan
     
    Scott No Mates likes this.
  5. NCB

    NCB New Member

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    Completely agree Lindsay ! Thankfully we have another application with a big bank approved so plan to go with that.
     
  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Keep in mind that cheap rates like this usually don't stay so cheap and in a recession these sorts of clauses can be very scary.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I have reviewed a few loan agreements and these sorts of clauses are common these days
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Sales rep ?

    ta
    rolf
     

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