The Earthquake in Christchurch has caused devastation not only to the city and its citizens but to our country as a whole. As New Zealand and the world watch and wait for hope, our thoughts turn to Canterbrians, to the loss of their homes and the destruction they are faced with.
In every situation where a mortgage is placed on a property, the lending will not advance the funds to purchase the house without evidence of house insurance being in place and the lender noted as having an interest in the property. If EQC are going to condemn a house and not allow residents to move back in, that would normally result in a payout on the insurance. Whenever there is a lender noted as having a mortgage on the property the cheque would go to the lender to repay that funds off the mortgage. This is all fine and most of us would want the mortgage repaid.
My concern came when I realised that many clients still have fixed rate mortgages. I have only ever in all of my years in finance known of the fixed rate penalty being waived on one occasion. This was in fact due to EQC paying out becuase the property was condemned due to a landslide. The lender was going to impose the penalty until we intervened on behalf of the client and appealed to their common sense.
We have been in touch with lenders to ask this very question now, and I am absolutely delighted that both ASB and Sovereign have confirmed that they would not charge break costs on receipt of the EQC payout.
Their email goes on to state…
“”We have also decided that when the loan is re-established, after the property has been repaired, we will re-instate the loan at the original rate if that is what the customer wishes to happen. These principles also apply if we receive interim payouts from the customer’s general insurer.
The policy applies to both ASB and Sovereign.””
Well done ASB and Sovereign. It is really great that they lenders have appreciated that rules should sometimes be broken. We all understand that when we sign fixed rates agreements, it is a contract, but sometimes contracts have to be broken, and common sense should prevail.
We do expect to hear from Westpac and trust they have taken the same view.