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Mortgage Matters
4 mortgagematters
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On 6th June 2015, new Government rules came into effect around the “Credit Contracts and Consumer Finance Amendment Act 2014 (CCCFA)”. From a Home Loan perspective, there are a couple of things that will change.
With Auckland house prices hitting a new barrier every month:
1) The days of guaranteeing a loan by just signing on the dotted line are over. The lender and mortgage adviser must ensure that the person guaranteeing the home loan has a full understanding of their contractual obligations i.e. if this project falls over… “who takes the haircut?” The bank will assess the guarantor’s ability to service the loan in a worst-case scenario. This involves providing proof of income, expenses, assets and liabilities. You will also be recommended, and in some cases required, to seek independent legal advice. Banks will be watching out for “borrowers of convenience”, e.g. relatives or friends whose names are on the loan purely to make the numbers work.
2) The lender, with help from the mortgage adviser, must provide an ethical advice process; identifying potential hardships for the borrowers themselves. It’s in everyone interests, including the bank’s, that the borrower has access to all of the relevant information and professionals, to make an informed decision. This is particularly important where a borrower is under financial duress or is inexperienced.
I believe that we all have an obligation to look out for each other; so, if in any doubt, please seek professional or legal advice before entering a loan or guaranteeing arrangement. For further details, feel free to contact Ivan on 09 427 5870 or 0275 775 995 or emailivan@ivanurlich.co.nz
Ivan Urlich is a registered financial adviser specialising in mortgages. His disclosure statement is available free of charge on request.
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