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popwebplanet · Mar 28, 2009, 04:36 PM

The following is the clause in my mortgage contract pertaining to Full Prepayment of the Mortgage

If the borrower pays the unpaid balance in full before the final payment is due, the Borrower may be required to pay a fee to compensate the Lender for its loss resulting from full prepayment. The Lender may have suffered a loss if the Lender’s current interest rate is lower than the interest rate applying to this agreement. The Borrower may also have to pay the Lender’s administrative costs relating to the full prepayment.

The amount the Borrower may have to compensate the Lender for its loss is calculated using the formula prescribed in regulation 9 or regulation 11 of the Credit Contracts and Consumer Finance Regulations 2004; plus Administrative costs and fees of $750.00 for the Lender’s actual or estimated administrative costs on prepayment.
The finance company I have the mortgage have gone into receivership and the caretaker company is no longer relending therefore unable to apply this formula. Instead they are trying to charge me $25K NZD to break the mortgage contract and are using the Market Swap Rates as the basis for their case. What I would like to know is, if a borrower has signed a contract which clearly states the formula to be applied in the event of the mortgage being prepaid in full at an earlier date, does the Lender have the right to apply any other formula which they happen to dream up or do they have to stick to the formula agreed to in the contract? If they do have to stick to the formula agreed to in the contract, and cannot apply it, what are my legal responsibilities?

Kind regards
Lesley aka Popweb Planet

Xyzpdq0121 · Apr 11, 2009, 11:12 PM

This is kind of like... what do they think they can do and how much do you want to fight it... Mortgage companies will do a lot of things because they know people do not have the money to fight them or it will cost them more in the end then paying the fee. You need to really check with an atty on this one. I am an expert in real estate contracts but this one is a unique situation and I am not sure what a judge would decide. I recommend a good atty be sought to see what your options are!