Guide to borrowers� rights

Once you have made the offer on a property there is usually two or three parties involved in the transaction, and each party has certain obligations and rights in the mortgage process.

The borrower/s: In the first instance you are the applicant (making application for a loan) however once the loan is drawn down you are the borrower.

The mortgage provider: also known as the intermediary. There is an obligation for your mortgage provider to find the most suitable loan for your requirements within the parameters you provide.

The lender: The organisation providing the finance for the loan.

There are differing rights and obligations on all parties involved in the transaction depending on which State you reside in. For example, in NSW, Victoria and Western Australia the activities of the mortgage provider are governed by State Legislation with the overriding principal being disclosure and consumer protection.

Borrower Rights

• The lender must provide a credit contract which sets out the terms and conditions of the loan in clear terms. This contract is most often referred to as the Letter of Offer. The borrower should check the details of the offer are in line with the original proposal paying particular attention to the financial details including loan amount; interest rate; term of loan; and structure (interest only or principal and interest). Depending on the loan product, there will also be clauses addressing any additional costs such as 'early termination costs' or 'break costs'.
• The lender must advise of any interest rate changes before they commence either directly or via a newspaper advertisement. This does not apply to a reduction in rates.
• The lender must advise any repayment increases at least 20 days prior to the change. This must be in writing directly to the borrower or their representative. This does not apply to a reduction in repayments.
• A loan statement must be provided to the borrower at least every six months.
• The borrower can dispute statements, and if necessary use a tribunal to have unjust transactions varied or cancelled.
• The borrower can pay out the entire loan at any time (fees and charges may apply to some loans if you do this, and will be detailed in the letter of offer).
• The borrower can terminate a credit contract before drawing down.
• The borrower may have the repayment date extended in financially hard times and there is in place national legislation aimed at protecting consumers if such circumstances should arise.
• The lender must provide a payout figure within seven days of written request.

Borrowers Obligations

• Be truthful and factual in all details provided in the loan application.
• Make all the repayments on the due date.
• Keep the property in good repair and not undertake any major alterations without the lender's consent.
• Insure the property for its full value, and not do anything to void the policy.
• Not sell, lease or mortgage the property without lender's consent.

_{Disclaimer: This document is for information purposes only, and must not be relied upon as a substitute for professional services or legal advice.}

_{Source: MFAA}