Moneynet.co.uk said consumers might be unaware that such a clause exists in their mortgage agreement and may be vulnerable to losing their home.
The clause secures all further debt with the mortgage lender against the mortgaged property, including any additional borrowing such as personal loans or overdrafts. This would allow a lender to repossess a property should the borrower default on subsequent loans.
Richard Brown, chief executive of moneynet.co.uk, commented: “People may think ‘better the devil they know’ when deciding which lender to choose for an unsecured loan, but unless they read all the small print they could be unaware that they are, to all intents and purposes, signing up for a secured loan rather than an unsecured loan.
“Anyone in the process of taking out a mortgage should ask their solicitor to find out if the lender applies an ‘all monies charge’. If it does, it’s worth asking the lender to remove the offending clause.”
Richard Morea, technical manager at London & Country, said that although it was an important clause to highlight when working with clients, it could just be making something out of nothing.
“If a lender was working to the letter of the ‘all monies clause’, it could theoretically repossess a property, but it’s unlikely a sensible lender would do so for a small loan. But Moneynet.co.uk is right to highlight it.
“We always stress to our clients that they need to read through their mortgage agreement very carefully. However, if most major lenders don’t act upon the clause, then Moneynet.co.uk could simply be making a mountain out of a mole hill.”
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