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Callum

By Callum

I'm a Lawyer at CS Law

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01.07.19

What does your Bank have to tell you when you get a Mortgage?

Getting a loan is a very common way for purchasers, and especially first-home buyers, to enter the property market in New Zealand. Loans are secured against the property you buy.

In New Zealand, the Credit Contracts and Consumer Finance Act 2003 requires Banks and other finance companies to provide information to you when you take out a loan to buy a house, and:

  1. You’re a natural person – not a company or some other entity;
  2. The money you’re borrowing is for domestic or household purposes – this means that you must be buying the property to live in, not as an investment property;
  3. You have to pay interest, or the Bank takes a security interest (like a mortgage); and
  4. The Bank provides credit in the course of its business.

 

If all of these boxes are ticked, the Act requires the Bank to give you certain information before you sign the agreement. This includes (but is not limited to):

  1. The Bank’s name and address;
  2. The initial unpaid balance;
  3. The amount, timing and a description of any advances made afterwards;
  4. The total advances you’ll be receiving (if this is known);
  5. The credit limit (how much you can borrow);
  6. Any interest you have to pay and how this is calculated;
  7. Credit fees and charges;
  8. The security interest taken under the agreement. This means that the Bank tells you that it’s taking out a mortgage over the property you’re buying and how much it can recover if it has to sell the property;
  9. Your right to cancel the agreement; and
  10. Your right to apply for relief on grounds of unforeseen hardship. This means that if you lose your job, or are injured or ill and you struggle to make your payments, you can apply to the Bank to postpone your payments, or extend the term of the loan (how long you have the loan for).

 

The Bank also has to keep you up to date with advances it makes to you later, any interest or fees you get charged, and when you next need to make a payment. It also must tell you about changes to the interest rate, payments and the credit limit if it has the power to change these things.

All of this information has to be given to you in writing. It has to be clear and concise, and easy for you as the borrower to understand. It also must be made “in a manner likely to bring the information to the attention of a reasonable person” – so it can’t be hidden in the small print.

This means that you should be well informed before you sign your agreement with the Bank. However, it’s up to you to feel confident that you’ve got all the information you need before you sign an agreement. If you feel like an important piece of information has been missed, make sure you raise this with your lawyer, Bank or mortgage broker.

When you get a mortgage, you’re giving the Bank (or finance company) you’re borrowing from the power to sell the property you’ve got the mortgage over (which will be the property you’re buying, for first home buyers) if you default on your loan. This means it’s important to know what the Bank needs to tell you before you sign along the dotted line.