Many of our clients have enjoyed the services of One10, to whom we refer clients for their financing needs. We have been working with Paul Degatesbury and Selmina Agonovic from One10 for nearly 10 years now and they have always looked after our clients. Please contact us if you require assistance with finance, whether it be for the first time or looking to refinance. Recently we had a situation with a client who was embarking on some major home renovations. I asked Paul to contribute the following article for your interest. A common misconception amongst borrowers is that having a mortgage means owning a property. That is not entirely true. Every mortgage is a contract between you and the lender, which you sign to acknowledge that you have read, understood and agreed to the terms and conditions of having the mortgage. How you can be in breach of your mortgage? Common ways borrowers may be in breach of their mortgage terms and conditions:
- Allowing the insurance to lapse or drop under the required level of cover (underinsurance)
- Not paying property fees on time, such as rates, strata, land tax etc.
Any structural changes or major renovation to the property. This applies even if you are using your own funds to make the improvements, you still need to alert your lender. Of course there are other ways you can breach your mortgage contract. The most common is being in arrears, which is when you are outside the terms of your repayment schedule. What action can the bank take if you are in breach? Depending on the circumstances, being in breach of your mortgage can have serious consequences. Some common remedies for the lender include:
- Charging penalty or late fees
- Breach notices and/or letters of demand
- Default notices and judgments against your credit file
- Eviction and foreclosure
Handy tips Remember, it’s in your best interest to have a good relationship with your lender. Even if you’re unhappy and plan to refinance, keep in mind the new lender will be keen to take a good look at your past record with your previous lender, and will always ask for statements to verify conduct over the past 6 – 12 months. In extreme cases, defaults will last on your credit file for 5 years or more, and with current laws your credit file has more detail than ever for lenders to assess and scrutinise. Keeping this mind, here are some tips to make you a model bank client, and keep your credit history squeaky clean:
- Pay your mortgage on time, every time. Select a convenient & easy to follow repayment structure, one that doesn’t require you to shuffle money or remember to make the payment. Make it automatic, set & forget. Remember, every dishonor will cost you, and not just in money
- Get ahead. If you’re able, pay a little extra so that you’re ahead of your contracted schedule. This always looks good
- Never make anything more than minor cosmetic changes around the home, without first consulting your lender
- Always pay your property fees on time
- Set your insurance policy to renew with indexation, an option that allows your cover amount to keep pace with inflation
This article appeared written by Stephen Mason and Paul Degatesbury of One10, appeared in our April 2016 newsletter.