johnokiwi

We take peoples point that this is standard practice etc etc however our point is that if there is a possibility that penalties are going to be so severe then banks should be more up front in warning people of the possibilities at the onset of a loan - giving examples of what it might be with the contract for instance - which they weren't with us

yes we did sign it (and read it, for your information ) but it said we 'may' pay a penalty and gave us very woolly info about how this would be worked out in the event in fact when we knew there was a possibility that we might need to sell and asked Westpac for details of the formula they used they could not provide it

the purpose of this warning was to make people aware of the pitfalls in the current climate as interest rates have changed and penalties for everyone are likely to be more severe, if they like us (owing to unforeseen circums ) have had no alternative but to sell their house before the fixed term expires ( in an ideal world no one would break their contract, but hey, this is hardly an ideal world)

we will be taking this further and thank those who support us in this - it sure helps when you feel you're not alone

johnokiwi

Further to this someone has sent us a link to an article in today's Press newspaper (in NZ we know) but very interesting all the same...

http://www.stuff.co.nz/4738849a11.html

we are obviously not alone.......$15,000 = 'reasonable' ??!!

and for those who feel they've read their contracts fully etc etc, you never know when life throws a curve ball and you could find yourself in the same unfortunate situation, having to break your contract - we're sure you'll be thankful there are people out there willing to challenge the banks on this..

isgraham

Its actually more to do with the bank having to go to the markets and source the money at a fixed rate and provide a return (interest) to whoever they have borrowed the money from. They can't break the contract so you get to take a hit instead of them to cover costs.

louie

In that case, that is appalling. As I said before, our contract explains exactly how it is calculated, so it wouldn't be any surprise to us. But you have every right to be angry. Actually I can't see how (legally) they could enforce that if it is not detailed in the agreement you signed.

louie

Here's an idea. A long shot, but something similar worked for some friends of ours here in the UK....

How about negotiating with your buyers a lengthy period between exchange and completion, long enough that your fixed rate penalty period will have expired before you complete the sale? You could rent your house to the people who are buying it in the meantime. If the rent charged was less than the mortgage they would be paying + whatever return they could get on the savings they would be putting into the purchase, they would be better off. If you could avoid the early repayment penalty, you would be better off. You would both have the security of knowing that you had exchanged contracts and thus the sale would be going ahead at some specified point (assuming Kiwi law similar to UK law).

Obviously it would only work if you didn't need your capital immediately, if their mortgage offer could be sure to hold until the completion date, etc, etc, etc. But might be worth thinking about.

Good luck whatever happens!

johnokiwi

Thank you

Can we just say that any suggestions are greatly appreciated - the more options we have to throw at them the better...

We are seeing the lawyer who presided over the original sale and mortgage (as well as this one) next week and will certainly bring this up - we'll be interested to see what her perspective is (particularly as she too did not draw our attention to/warn us about the potential severity of any penalty charge)...although we think she'll be doing some serious buck passing!

And we have sent our complaint to the Banking Ombudsman - who is apparently investigating other such cases..

Oh, and what a surprise ! we've yet to have a response from good ol
Westpac

Watch this space!

emelems

Makes me furious when people selling financial packages "wash over" the small details.. and the amount they are charging you is hardly SMALL!

In an ideal world you may have cause to take up a complaint.. but I would think that they would just argue that you signed up for it... if it did get to a court of law, not overally sure any judge with an ounce of common sense wouldnt rap Wespac over the knuckles for lulling you into a false sense of security... however, i imagine he would say the contract was valid???

I think the long period between exchanging and completing would be your best option

Em x

louie

But if the contract doesn't specify how the penalty is calculated, how can that be valid? I don't know anything about Kiwi law, a little about UK law though I'm not a lawyer, but I would have though it would be unenforceable if there really was nothing specific in the mortgage documentation.

johnokiwi

From what we can gather the charge has to be deemed 'reasonable' and this is especially the case if the formula used has not been explicitly laid out on documentation but we are obviously still gathering info etc etc

daddyofthree

We have been told that we will need to pay 5% of our remaining morgage with Brittania BS. It would be interesting to see if Brittania would be prepared to allow me to invest in Aus as suggested earlier and not penalise us!

comet555

Does the formula appear anywhere in the paperwork? In the paperwork we had with Macquarie it did mention the formula for a breaking a fixed loan.

The formula was strictly algebraic (no numbers) and was fairly complex. Even as a math teacher it would have taken me a bit of time to go through the formula and figure everything out. Without seeing an example it's tough to determine what you would owe just looking at the formula.

johnokiwi

Hi there

No the actual formula used does not appear in either the contract or attached lengthy T & Cs (where it just says that it can be provided 'on request')...

comet555

It seems a bit odd that it does not appear anywhere in the contract or loan documents. I would argue that one!

johnokiwi

[QUOTE=comet555;6911347]It seems a bit odd that it does not appear anywhere in the contract or loan documents. I would argue that one!
/QUOTE]

Yes, we sure will! Have got a few irons in the fire at the moment so will see what transpires next week...