“The big print giveth and the small print taketh away.”
This quote personifies the frustration a lot of people experience when reading and signing important documents. And in the end they do the same thing they do with software licence agreements: ignore everything and click ‘I agree’.
But while this saves them time, signing documents without checking for easy-to-correct errors could end up costing them thousands.
Okay, so we can’t ask a software company to amend its licence agreement. And chances are the bank won’t change the provisions within its Privacy document or Memorandum of Mortgage for us. But we need to stop blindly agreeing to whatever’s put in front of us, and start skimming and reviewing these documents before we sign on the dotted line.
By making it a habit, we’ll get better at finding the information specific to our transaction and ensuring we don’t sign anything that doesn’t reflect what we’ve asked for.
Of course, when you ask for mortgage advice and receive a massive pile of documents, it’s tempting to just assume it’s all standard and prepared the way your adviser said it would be. And just when you think you’ve finished getting through all of them, along come the loan documents from the financial institution.
Soon you’re suffering from ‘document fatigue’, and trying to convince yourself you don’t need to read any more of them.
These documents are all the same, aren’t they? Surely there’s nothing important buried in there. And the information I provided with the application would still be the same, right?
Unfortunately, while you’d expect important information about a mortgage to be in a summarised schedule, it isn’t always the case. Contracts and documents often have annexures or special conditions embedded deep inside them. And not reading (and possibly correcting) them before you sign can lead to a great deal of stress later on.
For example, special conditions to loan contracts are often nestled towards the end of the document, before the execution pages. These can be simple requirements, like needing to obtain building insurance. But they can also include less straightforward requirements—all parties needing to obtain legal and financial advice, or solicitors needing to provide certified copies of certain documents.
Another example is repayment options. Some lenders don’t specify the length of the loan’s interest-only period on the same page as the repayment details. They’ll mention what happens “after the interest-only period”, but put the terms of the interest-only period several pages further into the contract. Unless you check what’s stated in the contract (which means knowing where to look), you may end up with a shorter or longer period than you’d like.
Remember: The buck stops with whoever signs the documents (unless there was negligent advice). So you need to make sure every document you sign has been prepared correctly.
Mortgage advisers are responsible for ensuring lenders approve loan applications as they were submitted. But the people who run financial institutions make mistakes like everybody else, and so things can go wrong as they’re preparing the relevant documents.
The mortgage industry uses an array of electronic push and pull systems, where information entered into one system is shared with another. But sometimes these systems need human intervention, which means errors can occasionally creep in.
And as popular as Trusts are these days, many financial institutions still haven’t automated the process of assessing them for a mortgage and documenting the results. Someone often has to enter information manually. And when that happens, the margin for error increases significantly.
So how on earth can you read every document you sign before you sign it? The truth is, you can’t. And I’d hazard a guess that nobody ever does. But that doesn’t mean you should sign it without checking the important stuff.
In my next blog post I’ll take you through each stage of our Mortgage Advice process, and give you strategies to help you skim through documents to find what you need to double-check.
