Beware missing or delaying mortgage payments

From: Les .



G'day all,

Recently sold one of my IP's - it had been untenanted for some weeks while on the market. Cashflow got a bit tight because of other costs around the same time, so I rang my lender to delay one payment of the mortgage (had an unconditional contract due to settle in a further 6 weeks).

Lender said "Yeah, sure - delay it one month, and catch it up next month" - no worries (pressure off, whew!!).

Settlement happened, and, lo and behold, my mortgage payments had been jacked (for that month) by 2% - you know, the usual penalty interest. Sounds reasonable? Well, not really - since I hadn't defaulted, but ARRANGED the late payment, I was surprised the 2% impost was invoked. Still - it's only 2% ......


WHOAAAAA!!! 2% of what? Oh, 2% of your WHOLE outstanding mortgage amount!!!

And since mortgage interest at that time was 5.95%, a 2% lift is a 33% lift isn't it?

Anyway, in a nutshell, settlement docs showed I paid 32% extra for that one late payment - late for just one month. What Interest Rate is that per annum? 380%


It would have cost me $5 to do a cash withdrawal from my credit card ($400 for one month at 15%) - instead I got stung for $120+

So, people, just be very sure to make those monthly payments - arranging to delay a payment might take the pressure off, but might also cost you 380%. Or, if things are really tight, try the credit card instead.


Wish me luck, people - I am contacting the lender (pointing out the true situation) to see about a more reasonable outcome. For me, as it turned out, even a "Payday Loan" might have been cheaper for me (now THAT is scarey!!!).

Regards,


Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1
From: Adam Randall


hello
Funny you should mention that, the exact same thing happened to me last week, 1 late payment of 1200 dollars and I got a late fee of $460. Thinking it was a mistake I contacted Adelaide bank, they told me I should read my contract more carefully. when I told him I could get a better interest rate at sharkys pool palace he got a little bit offended. I then explained that if I am forced to pay this fine I will take all of my loans to another bank (@500,000), he said he will do his best to reverse the fine. This is a very underhanded, unfair, and plain disgusting rule, that takes advantage of people having difficult times by making them more difficult. By all means charge me default interest on the overdue funds and a fine for missing a payment, but don't penalise me for the entire amount.
I would recommend people check any contracts they sign in the future for a clause that charges default interest rate on the entire loan, this could have an absolutely devastating effect, being that this is in effect for the entire time you are behind. The snowball effect definitley comes to mind.
Shame Adelaide bank Shame
 
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Reply: 1.1
From: Les .



G'day Adam,

I'm sure you'll find it is not just Adelaide Bank. Every mortgage I've signed has included a "penalty rate" - often 2% above current rate.

And, yes, this "2%" is HUGE - as it's 2% of the whole outstanding mortgaged amount. And it stays at that rate until you "catch up" with the repayments.

Now, if the current mortgages were 12%, then 2% on top does not hurt as much as it does when rates are 6%. Actually, I'm wrong there - dollar value is exactly the same - but, relative to your current Interest Rate, 2% on top of a 6% mortgage is a 33% HIT. But, if mortgage rates were 12%, it's a 16% hit.

Still, it's a warning to all. Don't be tempted to be late with your mortgage - it could hurt BIGTIME. In my case, I had approached them to "arrange" the delay in payment (as opposed to just not making the payment) so was quite surprised when they invoked the "penalty rate". And, my major gripe is that NO-ONE (not my mortgage broker, my mortgage manager, nor my lender) even mentioned that the penalty rates would apply. I've contacted them to point out the "oversight" - and am hopeful of a refund.

And, as shown it would have been FAR CHEAPER to just borrow it on my Credit Card (and we thought THEY had huge Interest rates!!). They do!! They charge 15%, while penalty rate on a mortgage is "only 2%". Small beer? Not on your life!!

Perhaps I should have called this thread "When is 2% not 2%"??? (Bit of deja vu" there ;^)

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.1.1
From: Ian Parham


'Evening Les, Adam & All

I have just received a letter from the same institution as Adam for a non-payment due to my electronic transfer being rejected. This came about because their B-Pay number was suddenly changed (due to internet fraud) so my payment was null and void.

Note: I had not received any notification from them that they were changing the B-Pay number. I was alerted to it by a casual check on my main banking account (e-mail notification) with another mob!

No big deal I thought, I found the new B-Pay number and put the payment through immediately. However, this letter today has got my goat up!

"Whilst we are sure this is just an oversight on your part...(MY bloody part???), please make your payment immediately. We would like to remind you etc. etc.,. ..incur an additional charge equal to one twelfth of 2.50% of the outstanding balance."

Ok, so that's what they do...fine, I can live with that...if it was my fault!

Furthermore, as I calculate the prospective penalty versus the actual arrears...the penalty is vastly, and I mean vastly, more than the arrears!!

They have invited me to contact the Credit Control Department...an offer I am going to accept...oh boy yeah, am I going to accept that offer!!!

Presumptuous, condescending, bullying @#$&%!

...time for me to change financiers I think ;>)

I'll try the other mob.

Cheers Ian
 
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Reply: 2
From: Ian Findlay


Get onto the bank PDQ. If that doesn't work get a supervisor, if that
doesn't get a manager and go up the tree until you get it reversed.

Remember you "agreed" with the lender that you were going to delay therefore
you were not in default. I'm sure the penalties were not pointed out at the
time or else you wouldn't have done it - point out how ridiculous they are
being and that you're such a good customer.

Ian

----- Original Message -----
From: "propertyforum Listmanager" <listmanager@bne003w.webcentral.com.au>
To: <Recipients of 'propertyforum' suppressed>
Sent: Sunday, August 18, 2002 10:23 AM
Subject: Beware missing or delaying mortgage payments


> From: "Les ." <lezzo35@hotmail.com>
>
>
> G'day all,
>
> Recently sold one of my IP's - it had been untenanted for some weeks
while on the market. Cashflow got a bit tight because of other costs around
the same time, so I rang my lender to delay one payment of the mortgage (had
an unconditional contract due to settle in a further 6 weeks).
>
> Lender said "Yeah, sure - delay it one month, and catch it up next
month" - no worries (pressure off, whew!!).
>
> Settlement happened, and, lo and behold, my mortgage payments had been
jacked (for that month) by 2% - you know, the usual penalty interest.
Sounds reasonable? Well, not really - since I hadn't defaulted, but
ARRANGED the late payment, I was surprised the 2% impost was invoked.
Still - it's only 2% ......
>
>
> WHOAAAAA!!! 2% of what? Oh, 2% of your WHOLE outstanding mortgage
amount!!!
>
> And since mortgage interest at that time was 5.95%, a 2% lift is a 33%
lift isn't it?
>
> Anyway, in a nutshell, settlement docs showed I paid 32% extra for that
one late payment - late for just one month. What Interest Rate is that per
annum? 380%
>
>
> It would have cost me $5 to do a cash withdrawal from my credit card
($400 for one month at 15%) - instead I got stung for $120+
>
> So, people, just be very sure to make those monthly payments -
arranging to delay a payment might take the pressure off, but might also
cost you 380%. Or, if things are really tight, try the credit card
instead.
>
>
> Wish me luck, people - I am contacting the lender (pointing out the
true situation) to see about a more reasonable outcome. For me, as it
turned out, even a "Payday Loan" might have been cheaper for me (now THAT is
scarey!!!).
>
> Regards,
>
>
> Les
>

>
> - "Eschew Obfuscation" - ;^)
>
>
>
> To reply: mailto:propertyforum.87991@bne003w.webcentral.com.au
> To start a new topic: mailto:propertyforum@bne003w.webcentral.com.au
> To login: http://bne003w.webcentral.com.au:80/~wb013
>
 
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Reply: 2.1
From: Dale Gatherum-Goss


Hi

One thing that I've been known to do is to talk to the supervisor and ask who his/her manager is because I don't want to talk to the supervisor. . .

This has had me talk to the State Manager of the ANZ Bank, the Deputy Commissioner of Taxation and such other notables. Believe me, they are usually quite pissed off that their time is being wasted by a cranky old man who should have had the issues dealt with at a lower level.

It get's action, but, it will not win you any friends.

Have fun

Dale
 
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Reply: 2.1.1
From: Anonymous


Hi,

Just an observation, but even though the bank said OK to the payment not being made...that did not mean they would not charge the penalty interest.

Technically you still defaulted. All you did was get them to OK not to call in the whole loan.

You will also come unstuck if you try to refinance as they review your previous payment record and it will now show a non-payment.

Just because they said OK didn;'t mean there was no impact.!!

I think the BPAY one was unfair; but to ring and ask for an extra week....why shouldn't the bank charge you??? You signed a contract.

As an extra....what if the bank rang you and said they were running a bit short of cash and could you pay a week early???...

If you have the means to pay; ALWAYS make your home loan/investment loan payments. Even if you have to get a cash-advance etc..

Cheers

The Banker
 
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Reply: 2.1.1.1
From: Les .



G'day The Banker,

Thanks for your input - yeah, you're right - and with hindsight, that is easy to see. My post was to alert others who (like me) thought these things could be "arranged".

And, isn't it a bit strange no-one "reminded" me that the penalty rate would STILL apply even though the delay was "arranged"?

Or is it "normal" for a Bank to think "Go ahead, stuff up your credit rating, pay an exorbitant penalty hit, and we'll just be happy to take your money". Sucker!!!

And now, from other replies, it seems SOME Banks are charging 2.5% as a penalty. At current rates (say, 6.5%) that's a 38.5% uplift!!!!!

Yes, we sign a contract - but does that then entitle the lenders to be "closed-mouth" when we are about to hurt ourselves? It's not as though the average person deliberately sets out to shoot themselves in the foot, is it?

They (the Banks) are the ones fully versed in all of the ramifications - we sign a contract, then pay a mortgage for bloody years, then, out of the blue, for one reason or another, we can't pay (or want to choose to defer - just for a month, etc.), ring the lender to talk about this and NO WORD IS MENTIONED OF THE TRUE COST of what we are asking!!! Are they embarrassed to admit just what a rip-off their penalty rates are???? Their credit cards are often maligned by you and me because of the "over-the-top" charges - but in these cases, the credit card cost (to cover one month's mortgage) is PEANUTS compared to these draconian charges.

I think the Banks should have a Duty of Care to assist people who are about to hurt themselves through ignorance. Thank God we have this forum where we can help to educate each other - it seems like the Banks won't.

And, yeah - I'm only talking about one of them - maybe there are some out there that DO care enough. Any takers? Anyone able to tell me of a Bank that DID let you negotiate a delayed payment without ripping your arm off?

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 2.1.1.1.1
From: Ian Parham


'Evening Les & All

Onya Les!! What a pearler...I can sleep easy tonight. You've just given me a serious chuckle.

Les on Banks: "maybe there are some out there that DO care enough."

Not sure if it's how you meant it to be, but that was one very funny line.

It would have to get an honorable mention in Michaels Classic Posts i'm sure.

Kind regards & very tongue in cheek....Ian ;>)

Cheers!
 
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Reply: 2.1.1.1.1.1
From: Paul Zagoridis


Sorry about your pain Les

However let's look at it...

1) Your credit rating isn't likely affected in Australia. In the USA you're hosed but here finance providers can't put a late payment on your credit history.

2) We borrow money at market rates. These are for people able to qualify for bank finance. If you can't or won't make payments on time what is an appropriate penalty?

To reframe The Banker, what if your bank didn't pay it's dividend or the interest on a term deposit on time?

Sure the fees are exorbitant. My business pays $16-$38 whenever someone bounces a cheque on us. This on a cheque that is typically worth less than $20!

The reality is the fees for operating within the agreement are quite low. Otherwise we can go back to cross-subsidising everything.

I always ask if there will be any penalties or fees if I try to modify an arrangement. A lesson learned the hard way.

I'd be wary of insisting on more Duties for bankers. That will just mean more fees and charges.

It is possible to negotiate a delayed payment without penalty if you get them to agree first.

You can also try asking them to refund the penalty in the interest of good customer relations and to keep your future business.

Paulzag
Dreamspinner
WealthEsteem :: Psychology of the Deal
http://www.wealthesteem.org/
 
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Reply: 2.1.1.1.1.1.1
From: Les .


G'day Paul,

And thanks for your comments

"It is possible to negotiate a delayed payment without penalty if you get them to agree first."

Les>> I thought I had

You can also try asking them to refund the penalty in the interest of good customer relations and to keep your future business.

Les>> That's in train - wish me luck !!!

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 2.1.1.1.1.1.1.1
From: Felicity W.


I've always thought it's incredibly unfair that the bank charges me if someone else gives me a dud cheque that bounces.
Grrrrr
Keep smiling
Felicity :cool:
 
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Reply: 2.1.1.1.1.1.1.1.1
From: Steve Mcleod


Guys,
I have my home loans with Super Members Home Loans,part of the AXA group.After reading the above I phoned them to ask what would happen if I was to defer a payment.I was told (twice,two phone calls)they would look at payment history etc and see if I was advanced on loan.They would prefer people to call and talk,if I was advanced they would take the payment out of advanced amount,either way there would be no penalty,unless they went to get the money and it wasn't there($20 fee).they have no account keeping fees and unlimited and free eftpos.Current variable rate 5.99%.Anyone that's interested give them a call on 1800 650998

steve
 
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Reply: 2.1.1.1.1.1.1.1.1.1
From: Rolf Latham


Hi Steve

Its nice of the lender to give you your own money back, if you are in advance you have redraw and so therefore you are still making your payment.

The issue with ALL lenders is that if its not in writing it does not exist, and you are then depending on the extra oridanry behaviour of an employee to help you out.

Could I tell you some stories of misery and woe, it would make your toe nails curl.

Ta

Rolf
 
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Reply: 2.1.1.1.1.1.1.1.1.2
From: Les .



G'day Steve,

So there IS one Bank out there who doesn't rip your arm off? ;^)

This sounds like a P&I loan, rather than IO - normally, on IO you don't "get ahead" without deliberately paying extra.

Let me ask you this - did you ASK if there would be a penalty, or did you just question whether you could delay a payment? If the latter, did THEY TELL YOU there would (or wouldn't) be some kind of penalty?

As you can see, I am interested (and I would think others are too) to know which lenders will WARN YOU without you asking them first. In my case, I used the "keep them informed" phone call and asked whether I could delay - on proof (by FAX) that the property was indeed under contract and unconditional, they said "Yes!" and nothing else.

Like Paul said, I've now "learned the hard way" for next time. Ask more questions, and ask them twice (good point, Steve), via different routes - and "get it in writing".... Or look for alternatives (like a credit card - now THAT was an eye-opener for me).

It may be an oxymoron, but is there a Bank that considers the morally right thing to do (as opposed to their legal right to rip your arm off!!) and warn you when you could be hurting yourself? It seems to me they would retain a bunch of good customers (investors) if they were looking out for our interests as well as theirs.

Thanks for your input so far, Steve.

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 2.1.1.1.1.1.1.1.1.2.1
From: Steve Mcleod


Hi all,
Rolf,if money was in redraw they would use this and redraw would reduce by normal payment plus $20 for dishonour.If there was no redraw and you phoned to make other arrangements you would still be up for the same as with redraw.
Les,I phoned them with a hypothetical question after reading your post.Their number is 1800 650998 give them a call over the weekend and see how you go.By the way,the loan is P-I.Cheers.

steve
 
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