From: Michael Croft
Here's one to tickle your fancy.
Last year I helped some friends develop a property, finance was secure by mortgage (housing loan with redraw) over a residential property value $400k and the new aquisition to develop at $350k ($890k developed).
So the development goes well and my friends pay the mortgage down to $0 but don't discharge the mortgage as they plan to repeat the process - funny, they liked the $155k gross profit for 9 months of little effort. They instructed the bank at the time of their intentions to reuse this facility.
The bank now says "because you paid the loan down to $0 you have to re-apply for the loan; if you had left $50 owing on the loan you wouldn't have to go through this process." So now my friends have to go through the whole circus of an application (assets, liabilities, income verification etc)for a loan they believed they had in place over which the bank already has a mortgage.
The point being - how bloody stupid an internal rule is that? I'm sure there are worse examples but, for paying the loan to $0 (doing the right thing) and not leaving $50 outstanding? And yes, nothing has changed on their application form except that they are about $120k wealthier thanks to the development. Oh and their net worth is some $4m with no other loans except two credit cards with zero balances!
The bank is one of the majors and I know all banks are equally as stupid but come on............
Michael Croft
Here's one to tickle your fancy.
Last year I helped some friends develop a property, finance was secure by mortgage (housing loan with redraw) over a residential property value $400k and the new aquisition to develop at $350k ($890k developed).
So the development goes well and my friends pay the mortgage down to $0 but don't discharge the mortgage as they plan to repeat the process - funny, they liked the $155k gross profit for 9 months of little effort. They instructed the bank at the time of their intentions to reuse this facility.
The bank now says "because you paid the loan down to $0 you have to re-apply for the loan; if you had left $50 owing on the loan you wouldn't have to go through this process." So now my friends have to go through the whole circus of an application (assets, liabilities, income verification etc)for a loan they believed they had in place over which the bank already has a mortgage.
The point being - how bloody stupid an internal rule is that? I'm sure there are worse examples but, for paying the loan to $0 (doing the right thing) and not leaving $50 outstanding? And yes, nothing has changed on their application form except that they are about $120k wealthier thanks to the development. Oh and their net worth is some $4m with no other loans except two credit cards with zero balances!
The bank is one of the majors and I know all banks are equally as stupid but come on............
Michael Croft
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