Reviewing Mortgage Documentation

Discussion in 'Property Finance' started by Claire1989, 24th Nov, 2018.

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  1. Claire1989

    Claire1989 Member

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    Hi all,

    I'm refinancing a loan. The new lender is Newcastle Permanent Building Society.
    I've received the loan documentation. Is there anything I should specifically look for in the documentation before I sign?
    I have a great credit rating, but my broker suggested this loan because the interest rate is quite good.
    Obviously if there are any major red flags I'll walk away and find a loan elsewhere.
     
  2. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    At the very least make sure borrower is correct and the security is too. See if they have snuck in a second security. Make sure loan is 30 years. Product and rate correct.
    Then read the standard terms and conditions
     
  3. Morgs

    Morgs Well-Known Member

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    Your broker should be able to talk you through the process and any queries
     
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  4. Claire1989

    Claire1989 Member

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    Thank you! So far, so good...

    However, see the clause below. This is a residential property that is already rented on an arms' length agreement.

    "You must get our written consent before you:
    Rent out the property or allow a surrender or variation of any rental agreement.
    However, you may enter into, vary, terminate, or allow a surrender of any arms’ length residential property agreements of the property, without our consent (provided you obtain our prior written consent to a change in the use of the property)."
     
  5. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    What is the issue with that clause?
     
  6. Claire1989

    Claire1989 Member

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    I can't see anywhere in the loan documents that indicates that they are aware it is an investment property that is already rented. My broker knows. Could it be a mix up and they've given me the wrong contract?
     
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Standard clause I suspect

    what loan type is it ?

    PPOR or investment ?

    ta

    rolf
     
  8. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    Surely this would have been disclosed at application.

    The contract terms and conditions are standardised.
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    There is a side doc where YOUR loan application is listed, where the lenders asks you to sign off same.

    It contains the material data that the lender made their decision on

    Its called a Credit Assessment Summary, and the lender would ask u to sign off on the same

    This would list the IP and the rental income

    ta
    rolf
     
  10. Claire1989

    Claire1989 Member

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    Great - I just had a look and it does specify that it's an investment loan. Thank you!
     
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  11. Claire1989

    Claire1989 Member

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    I just saw this clause in the terms and conditions states (with regards to the offset account):

    "The interest offset rate is the interest rate applying to your loan account under this loan agreement less the offset deposit account credit interest rate applicable to the offset accounts linked to this loan.
    This may not amount to the full interest which you would otherwise pay on your loan account."

    The offset account is called “Everyday Account with 100% interest offset”

    How do I know what the offset deposit account credit interest rate is?

    I expect to be able to put at least $100k per year into the offset account, so it may make a big difference.

    I did all of my calculations on all of the interest being offset. If that's not the case, I may need to reassess.
     
  12. Morgs

    Morgs Well-Known Member

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    The answer is there in plain sight :)

    The interest offset rate is the interest rate applying to your loan
     
  13. Claire1989

    Claire1989 Member

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    The way i read it is:

    The interest offset rate = the interest rate for the loan minus the offset deposit account credit interest rate.

    Implying that offset deposit account credit interest rate could potentially be lower than the interest rate on the loan.

    So even if the amount in the offset account was equal to the total amount of the loan, you could still be charged interest.

    Especially since they included this comment:
    "This may not amount to the full interest which you would otherwise pay on your loan account."
     
  14. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Suspect you need to seek legal advice rather than get comfort from non legal peops opinions.

    While I understand your concern, we have written a few of these loans and face these types of questions often.

    I will leave it at this.

    If CBA were looking to fleece you with fancy wording, you would have heard about it by now.

    As an aside, CBA have 2 types of offset...........

    one is the 100 % that you have, another is the MISA, which is also 100 % on variable loans, but LESS so on fixed rates ........

    ta

    rolf

    ta
    rolf
     
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  15. Claire1989

    Claire1989 Member

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    I just found this article here: Offset Account: What is a Mortgage Offset Account? | Canstar

    "There are two types of offset accounts:
    • Balance offset account: These accounts offset the interest payable on the mortgage by the balance of the account. The percentage of the balance that will be offset can range right up to 100%. However, a partial offset account may only offset your mortgage by a portion of the balance...:)
    • Interest offset account: These accounts offset the interest payable on your mortgage by the interest earned in the account. However, this could be substantially less than the interest rate of the mortgage. Depending on the interest rates of your mortgage and offset account, these accounts are likely to be significantly less favourable than balance offset accounts, but they are also less common. " :(
     
  16. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    A reliable and approachable source could be your banker or broker that set the loan up for you

    ta

    rolf
     
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  17. Claire1989

    Claire1989 Member

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    Thanks for your response. Sorry I posted my last comment at the same time as yours.
    My current loan is with CBA. I don't currently have an offset account, but I need to get one.
    The new loan proposal is with Newcastle Permanent. The quote about the offset was from Newcastle Permanent's documentation.
    Unfortunately I don't have the best broker, but I've put so much effort into the application, I'm reluctant to start again.
    I'm thinking of staying with CBA.
     
  18. Lindsay_W

    Lindsay_W Well-Known Member

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    If you are confused about your loan product and you've used a broker, please do yourself a favour and speak to them directly, it seems like the more you google the more you are confusing yourself.
     
  19. Claire1989

    Claire1989 Member

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    I know there are some amazing brokers out there, but unfortunately mine has broken my trust, so I feel the need to double check his responses now. I wish this wasn't the case. I've invested so much time in the application process.
     
  20. Lindsay_W

    Lindsay_W Well-Known Member

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    In regards to staying with CBA or continuing the refinance;
    Why did you decide to refinance to Newcastle Permanent in the first place? there must have been some benefit
    In regards to your broker;
    What has your broker done specifically to break your trust? Is it just your lack of understanding the product they've chosen for you or is it something they've actually done/not done?