Double loan trouble

Cash-strapped investors selling up are getting a nasty shock when hardball banks won't discharge their mortgage - or take their sale profits as a condition.

Investors with more than one property mortgaged to the same bank - one of which is likely to be their home - are striking trouble when trying to free up cash. They sell a property in which they have good equity, only to find the bank demands the entire sum to reduce the investor's other debt.

Claire Mathews, of Massey University's Banking Studies Department, says investors think the amount they borrowed to buy a property is the amount the bank will require to discharge the loan.

However where a borrower has more than one property mortgaged to the same bank, standard mortgage agreements tie together all borrowings and all properties over which the bank has mortgages.

So the bank can require more of the sale proceeds than just the amount the investor borrowed to buy the property before it will agree to discharge the mortgage.

To read the full NZ Herald article click here

Posted: 12 Jul 2009

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