Bank explained, if inadequately, that ability to service loan would still be considered

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Bank explained, if inadequately, that ability to service loan would still be considered

Categories:

Lending restrictions,

Summary:

In 2022, the Taylors sought a loan to make improvements to their rental property. The bank said the couple lacked sufficient equity in the property, but noted the Taylors had another property that had no mortgage over it. The bank explained it could process the application if they agreed to provide a mortgage over the other property as security for the lending. The couple agreed, and the lending was approved.

Published:

May 2023

Three months later, they sought another loan to complete the improvements, but the bank turned down their application, explaining it had concerns about their ability to service any extra lending.

The Taylors complained that the bank had led them to believe it would approve further lending if they provided a mortgage over their other property. They said they had relied on this promise and were now unable to finish the work and rent out the property. They eventually got a loan at another bank, but sought compensation from the bank for stress and inconvenience. The bank accepted it could have done a better job explaining that it would need to consider their ability to service any more lending, and offered them $3,000. They rejected the offer and asked us to investigate.

Our investigation

We listened to the calls between the bank and the Taylors and were satisfied the bank made it clear it would still need to assess their income in any future lending application, even if the property was taken as security. We explained this to the Taylors and urged them to reconsider the bank's offer.