"All monies" clause - where is it and can it be deleted?
- Thread starter Whozat
- Start date
Hiya
All good ideas................ but generally not for a newbie with little leverage. A few of my clients with wraps in the old days were succesful in getting them struck.
The vast majority of lenders wont allow any fiddling of their sausage factory contracts.
A while ago there was a person espuosing the benefits of non recourse loans. Again something that is used in larger scale commercial deals, but not something for a ma and pa investor.
Im not a legal beagle, I recall ? unless the striking or amending of any clause in a contract is co signed by a the lender the amendment is NOT valid.
ta
rolf
All good ideas................ but generally not for a newbie with little leverage. A few of my clients with wraps in the old days were succesful in getting them struck.
The vast majority of lenders wont allow any fiddling of their sausage factory contracts.
A while ago there was a person espuosing the benefits of non recourse loans. Again something that is used in larger scale commercial deals, but not something for a ma and pa investor.
Im not a legal beagle, I recall ? unless the striking or amending of any clause in a contract is co signed by a the lender the amendment is NOT valid.
ta
rolf
Hi,
I've heard seminar presenters say that you should have the all monies clause deleted, but have never heard of anyone who has successfully done it.
I've seen one person try to, and the bank refused to settle until new, unamended documents were signed.
Of course, if you're worth it to the bank, anything is possible!
Cheers, Medine
I've heard seminar presenters say that you should have the all monies clause deleted, but have never heard of anyone who has successfully done it.
I've seen one person try to, and the bank refused to settle until new, unamended documents were signed.
Of course, if you're worth it to the bank, anything is possible!
Cheers, Medine
Hi Medine.
If dtraeger2k is correct in writing the following:
"It basically means that a bank can decide to recover money from you from any account or loan that you have with them"
then I feel comfortable with the clause remaining in place, as I am not in a position to delay the approval of the loan I want. Besides, I'll just make sure I have no other accounts or loans with them!
(Though I am sure this would only be a minor delaying tactic if I did in fact default on a loan!)
I might try it further down the track when and if the balance of power shifts a little in my direction....
Thanks
Whozat
If dtraeger2k is correct in writing the following:
"It basically means that a bank can decide to recover money from you from any account or loan that you have with them"
then I feel comfortable with the clause remaining in place, as I am not in a position to delay the approval of the loan I want. Besides, I'll just make sure I have no other accounts or loans with them!
(Though I am sure this would only be a minor delaying tactic if I did in fact default on a loan!)I might try it further down the track when and if the balance of power shifts a little in my direction....
Thanks
Whozat
Unsure if you'll be able to get it removed or not... but another strategy around this is to spread your lending across multiple lenders. For example, have your PPOR, personal credit cards with lender A and IPs and investments LOCs with lender B.
That way if you somehow stuff up your investment LOC your PPOR is not as exposed.
That way if you somehow stuff up your investment LOC your PPOR is not as exposed.
Hi Joanna - You're not quite right with this understanding. The mortgage alone ensures that the bank gets paid first. The "all monies" clause gives them the right to sieze other property if there is a shortfall when the property is sold and the proceeds are handed over to the bank.
Hi domcc1 - If there was an "all monies" clause in your credit card contract it would certainly be right that the bank would be able to sieze other property to satisfy their debt. This is not usually the case. In reality, however, if you don't pay your credit card the bank will take you through the courts to the point where they ARE able to sell your home in order to satisfy their credit card debt. So the moral of the story is: pay your debts!
Cheers, Medine
More on 'All monies clause'
I attended a positive geared property night last night where a lady (assume broker) spoke of her experience and that of another that will soon be in the media.
In her case, when she first married and they applied for a home loan from Bank X, the bank said no. So they got her mum to come in as a guarentor. In the years that followed the husband needed some money for his business, so got a LOC secured against the home, a credit card and an overdraft account.
At no time were any home loan payments missed, however, after there was a separation, the x-husband didn't pay the credit card and the Bank X could not get hold of him so they went after the now single mum. The bill was around $45K, being the credit card and LOC balances. When she realised the damage the x-husband was causing her, she got a court order closing access to the accounts. However, this took 2 days, and the x-husband was able to draw all the funds from the overdraft too, bringing the bill to over $80K. This then had to be raised by the single mother and her mum, or they stood to lose one or both their homes.
The other story is yet to be published, but apparently a bank is using it's all monies clause to recover debt but using a mortgage contract written back in the 70s and the bank can't even find the contract, but wants to act on it anyhow.
It seems this "all monies clause", or sometimes called "all accounts clause" is very far reaching, both in time and across people and accounts! Something to be wary of, I'd say.
I attended a positive geared property night last night where a lady (assume broker) spoke of her experience and that of another that will soon be in the media.
In her case, when she first married and they applied for a home loan from Bank X, the bank said no. So they got her mum to come in as a guarentor. In the years that followed the husband needed some money for his business, so got a LOC secured against the home, a credit card and an overdraft account.
At no time were any home loan payments missed, however, after there was a separation, the x-husband didn't pay the credit card and the Bank X could not get hold of him so they went after the now single mum. The bill was around $45K, being the credit card and LOC balances. When she realised the damage the x-husband was causing her, she got a court order closing access to the accounts. However, this took 2 days, and the x-husband was able to draw all the funds from the overdraft too, bringing the bill to over $80K. This then had to be raised by the single mother and her mum, or they stood to lose one or both their homes.
The other story is yet to be published, but apparently a bank is using it's all monies clause to recover debt but using a mortgage contract written back in the 70s and the bank can't even find the contract, but wants to act on it anyhow.
It seems this "all monies clause", or sometimes called "all accounts clause" is very far reaching, both in time and across people and accounts! Something to be wary of, I'd say.
Hi Smitty
That particular scenario is very ilustrative of what can happen if one is careless with their financial affairs. I feel though it has one helluva lot more to do with not cleaning up your loose financial ends than it does an all monies clause
Getting an all monies struck isnt impossible, we have managed it on a few occasions. What most people dont realise is that getting rid of the all monies clause buys you time, it doesnt buy immunity. Doesnt take long for the lenders (especially credit card people) to get a judgement against you, and if you dont satisfy that real quick you will have the sherriff at the door.
I must say, of late, there has been a fair bit of scare mongering going on about bank X foreclosing without reason, or joe bloggs being sued because his tennant slipped on a banana peel, and therefore the dolls house and the cubby house should be in separate trust each with their own corporate trustee.
Often, BUT not always, I have noticed one needs to lift the veil to have a look at why/how the promoters benefit.
Just today I got a call from a Sydney Chap with a mill in loans. Hed been sitting with a mortgage reduction company and they showed him how they could kill his loan in 8 years instead of 25, in spite of the LOC being used being likely 5 k a year more exxy than his current product. Common sense would dictate something isnt right, but the numbers on the calculators and simulators dont lie - its just that they assume that you never spend any money other than basic living costs and your mortgage
ta
rolf
That particular scenario is very ilustrative of what can happen if one is careless with their financial affairs. I feel though it has one helluva lot more to do with not cleaning up your loose financial ends than it does an all monies clause
Getting an all monies struck isnt impossible, we have managed it on a few occasions. What most people dont realise is that getting rid of the all monies clause buys you time, it doesnt buy immunity. Doesnt take long for the lenders (especially credit card people) to get a judgement against you, and if you dont satisfy that real quick you will have the sherriff at the door.
I must say, of late, there has been a fair bit of scare mongering going on about bank X foreclosing without reason, or joe bloggs being sued because his tennant slipped on a banana peel, and therefore the dolls house and the cubby house should be in separate trust each with their own corporate trustee.
Often, BUT not always, I have noticed one needs to lift the veil to have a look at why/how the promoters benefit.
Just today I got a call from a Sydney Chap with a mill in loans. Hed been sitting with a mortgage reduction company and they showed him how they could kill his loan in 8 years instead of 25, in spite of the LOC being used being likely 5 k a year more exxy than his current product. Common sense would dictate something isnt right, but the numbers on the calculators and simulators dont lie - its just that they assume that you never spend any money other than basic living costs and your mortgage
ta
rolf
Smitty said:
Yes she was. I gathered she uses more securitisers or non-bank lenders (Resi, Wizard, MBL, Aussie) cos they would probably pay more bro (just my thoughts) but with securitisers u get LMI'd whether u put down 80% or not so be careful to reach the $2-$3M mark in non-bank lending and get maxed out. The Consumer Credit Code actually prohibits all moneys clauses and since all banks are bound under the Code, they have thus removed them from all their retail loan contracts. I know us investors usually sign a declaration about waving the application of the Code but to keep the docs standard, they don't distinguish between products like Investment, Home, LOCs..etc.. If its a loan, the terms will be as standardised as possible hence will remove the all moneys clause. This is retail. Commercial and Business Loans will still have them so be prudent.
I am also not a lawyer. However, in the interest of curing insomnia, I read a book a few years ago about mortgage law in Australia. It stated that there is a Doctrine of Consolation which allows the lender to apply to the Court to consolidate a customer’s mortgages. Therefore, striking out “all monies” clauses may not be a solution.
By the way, I won’t be reading anymore technical mortgage law books in the future – it was hard going!
By the way, I won’t be reading anymore technical mortgage law books in the future – it was hard going!
Whozat said:
An all monies clause in a mortgage document means (not surprisingly) that the mortgage is security for all amounts owing, on whatever account, by you the Bank. So for example if you have a credit card or a car loan and an investment property loan with a bank and keep your property loan repayments up but default on the credit card or car loan they can sell your IP to recover the credit card debt.
Note that there's a slight twist with respect to Consumer Credit Code regulated loans (ie home loans/loans for personal rather than investment purposes) in that a prior "all monies" home mortgage can't secure a subsequent liability unless you give written consent. (Same for guarantors).
With respect to getting it crossed out...I endorse what Rolf has said. This is one of those b/s throwaway lines you hear at seminars that doesn't work 99% of the time in practice.
The smart way to avoid an all monies clause is:
a) don't default!
b) spread your banking around (within reason) so no one bank has you by the proverbials
Surely what's more important than stuffing around with the pro-forma loan and mortgage wording is:
1) how much will this bank lend me? max leverage is the whole point isn't it?
2) what's the interest rate?
3) can I get the features I need on this loan
4) will they give me a great valuation for my property so I can harvest more equity by borrowing even more from this bank?
