HI all,
I am after a bit of info before I tackle the bank in the coming days.To paint a picture my IP was flooded in the QLD floods, thank the gods I have cover for floods.
I am looking to take a cash settlement and do alot of the work myself and use friends who are tradies.
Today I was informed that documentation from the bank that holds the mortgage is required to say that they are happy for a cash settlement to occur.
I am obviously going to get the works done. I am considering doing it myself and using friends may in effect come in well under the amount I am paid out.
Can anyone shed any light on what the bank may do etc or is it just a matter of procedure. Could the in effect take the cream off the top to lower the loan?
Will they require BSA contracts to see that these works are in effect conducted then use the contract amount to deem a possible new valuation?
I would like to add to the above that I do admit I am in a fortunate position compared to others and that I am only trying to make the best out of a bad situation
Thanks.
Be forewarned that taking a payout & not effecting a building contract for the rectification work, may mean the insurance company may not accept the premises as a risk.
I understand the risks of that. I want to sell the property on completion of the works. The works will be completed. I am more so after info on how the bank looks at the insurance payout.
the insurance company has no relationship with your bank, you direct it where to deposit the funds, not your bank.
This is exactly what I thought but a form is required to be provided by the bank to the insurance company.
Scott No Mates wrote:the insurance company has no relationship with your bank, you direct it where to deposit the funds, not your bank.The Insurance coy and the bank may have no direct relationship however as the Bank would have a mortgage on the property and this interest would be noted on the insurance policy the Insurance company must obtain Banks consent etc to release funds.
Although the OP has the best intentions to repair and make good the property the bank may require the insurance funds to be disbursed as they direct. If the OP reads the terms of their mortgage you will probably find a clause that relates to Insurance payouts.
Here is an example:
Insurance claims
5.1 You must do your best to ensure that proceeds from an insurance claim (including a claim by a governing body if the property is parl of a shared scheme) are:
(a) used to reinstate the properly or carry out
other works; or
(b) paid to us. (We must then use them as
set out in clause 21.)
5.2 Despite clause 5.1, if there is an insurance
claim and:
(a) the proceeds from the insurance claim are a material amount; or
(b) you are in default under clause 18; or
(c) (in any case) the National Credit Code does not apply to this mortgage,we may direct you to use or hold insurance proceeds you receive in a particular way, acting reasonably. If we do so, you must use or hold them as we direct.
5.3 You must notify us if an insurance claim is refused either in part or in full.
5.4 If the amount of an insurance claim is a material amount or you are in default under clause 18, we may, by notice, take over your rights to make, pursue or settle an insurance claim. If we do this, we may exercise those rights in any manner we choose, acting reasonably.Edit: To fixed formatting
Thanks for that Marc, I don’t have a problem with the bank being aware. I do however believe the money should sit in my offset account and that if I choose to do the work myself that I am able too. If I then come out ahead I should be able to use the money how I wish.
I don’t feel that I should be obliged to use a builder should I not desire it. If there is money left over I intend to use that to renovate another property.
I am hoping it would be a matter of ticking a box and I will get the money and use to fix the property.
If you intend to do the work yourself, you will still need to satisfy the lender of your ability to satisfactorily complete the works & not lessen their security as well as providing home warranty insurance or complying with the owner builder requirements & payments.
Applying any additional funds to other property may lead to the insurer to sue for unjust enrichment. How do you intend to backup your claim to the insurer?
Exactly how do I prove I am capable of doing such works? Why should I pay someone whos price my be inflated just to keep the bank happy?
If I negotiate a better rate than what the insurer can why shouldn’t I keep the left overs lol what should I just give it back to them. The amount of time I have spent on the phone to them and dealing with them it should be my payment for putting up with them..
Ah Grasshopper, just as the banks are loathe to lend to owner builders and are much more stringent on the release of progress payments, so are insurance companies when it comes to paying out monies to inadequately or uninsured, untrained 'tradies' where the liability may flow back to them. They want their pound of flesh but require that the scales are checked and properly calibrated.
Builder's prices are not necessarily 'loaded' but are more often reflective of compliance costs with BCA, OHSR, OFT etc and the fact that they may have overheads to recoup (ie staff wages & oncosts), tools, rent, phone/office/back of house etc, marketing costs, licensing and CPD requirements and the list goes on.
HI All, I have an update on my original post and unfortunately at this stage not really for the better. To be quite honest I am getting stuffed around more by my bank (who should be helping me) than my insurance company. Yes I am going to give them a free plug, Suncorp have done nothing but be helpful throughout the whole situation.
Scott no mates is correct. If you are in this situation you will require a proper building contract. The money will then sit in a term deposit account and it is then utilised similar to when you build from scratch. I have not go to the stage of what will happen should there be funds left over.
My bank is NAB but CBA loan docs state in this situation the funds are transferred to an account as stated by client should there be left overs. The way NAB have handled the situation is disgusting. The initial feedback I received was that they wanted the 150K from insurance paid off the loan which would leave me with a lump of debt, a flooded house and no rental income. My cat that is offspring from the two headed cat down the road and the chicken up the street this afternoon worked out this was not the best outcome.
The next suggestion from NAB was to do a complete loan assessment……… I am not borrowing anymore money lol. I have in the meantime purchased another property with another lender, so it a loan assessment was done on a NAB calculator it may not service so they may not be able to allow a cash settlement.
The banker had a piece of paper stating what was required for this situation……. I asked if I could have a look to get my head around what was required. "This is bank policy and for our eyes only"…… What is there to hide, if I have a better understanding I could in effect help her more.
Hypothetically if NAB don't allow a cash settlement they could in fact end up with a house of lesser value that what it would be if the insurance company conduct the works.
"We are breaking up with the other banks"……… "We are breaking up with the other banks as we bring them down"
I haven't dealt with a bank for a while due to using a broker….. Thank god I have a good one <moderator: delete abuse>.
fredo_4305 – how did you go with the bank and insurer? I think I will be in the same boat as you soon…
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