Read the small print on all documents when you apply for a home loan. That's the moral of this story.
A reader, Peter Mouton, sent us correspondence between his daughter, Amanda, a first-time home buyer purchasing a sectional title unit off plan, and Ian Slot Attorneys, acting on behalf of Boland Bank. The attorneys were claiming R199,50 as an initiation fee and R425 as a valuation fee for costs incurred on her home loan application.
Mouton agreed she was offered a home loan by Boland Bank but had turned it down She added that, to her knowledge, she had not signed anything implying that she was liable for Boland's valuation or other costs.
Her father, a property professional, placed numerous calls and faxes to Ian Slot Attorneys asking them to produce the documentation which proved his daughter was liable for these costs, but to no avail.
He said a representative of the attorneys was quite aggressive on the telephone and told him the matter would simply be sent for litigation. Eventually he sent the correspondence to Personal Finance because it might hold a lesson for other readers.
Anton Pereira, head of Seeff Home Loans, now a division of Boland Bank, said Mouton had signed an application form. The form contains a section which states that "the undersigned" accepts liability for any valuation costs if the applicant withdraws after the home loan is granted (see declaration below).
Boland instructs an outside firm of valuers to do property valuations over which home loans may be granted. It has to pay the valuers whatever happens, which is why it claims the valuation costs. A valuation "off plan", where a property is still to be built, needs two valuations an initial valuation and another after the property is completed.
The initiation costs are to cover administration. Both charges are within what the bank is allowed to charge under the Usury Act, Pereira said.
It appears from a letter sent to the bank that the attorneys had agreed to waive their costs but this was not clear to Mouton.
Chris de Beer, head of marketing and communications for Boland Bank, said it was unfortunate that the Moutons had not contacted Boland Bank directly. He added the bank would follow up the matter. The R624,50 in fees in Amanda's case would be waived.
A general manager in the home loans department of one major banking group said it only ever charges valuation and administration costs once the loan has been registered and the bond account opened. But his counterpart in another major banking group said banks were entitled to charge because costs were incurred, both in doing credit assessments and in valuing properties.
He urged applicants to be wary of the practice of some estate agents of making multiple applications on behalf of buyers to make sure they secured finance. Potentially, if some of those banks charged costs incurred on home loan applications, the buyer could face a bill running into a couple of thousand rands, he said.
Below is the declaration that Amanda Mouton signed that gives Boland Bank the right to recover costs:
I/we the undersigned hereby
9.1 Apply for a mortgage loan as set out herein
9.2 Agree to be bound by the standard conditions for mortgage loans of Seeff Home Loans, a division of Boland Bank PKS Limited (herein referred to as SHL) a copy of which has been supplied to me
9.3 Undertake to do everything and to sign all such documents and furnish all such information and documentation as may be requested by SHL in order to place it in a position to extend this loan and to register the underlying mortgage bond
9.4 Certify that the information furnished herein is true and correct and that no information which might affect the decision of SHL has been withheld
9.5 Acknowledge that I/we shall be liable for all valuation fees and wasted costs incurred by SHL or its attorneys in the event of me/us withdrawing from the loan once granted, to the extent allowed by the Usury Act
9.6 Authorise SHL to make enquiries to confirm the information herein and to give the usual references and bank reports to any third party.