Fixing broken collars

Last year, we bought a house just before the craziness of Covid-19 happened, signing at a point where we were potentially lucky to get the loan we needed and us moving as the first of the restricted movements were enforced. We too two separate loans due to the laws here, with one to cover the house and one for the renovation with a significantly higher interest rate, under the proviso that we had to meet a floor evaluation level a year later, for us to not have to pay back the substantial second loan. If we did meet the required value, the same terms and conditions would be applied to the renovation loan, so we would still have too loans, but they would be identical.

One of my own conditions was to have a collar put on the loans to protect us against the potential for rising interest rates. This means there is a premium paid monthly on the loan, but if interest rates do rise significantly, we are protected. Seeing as interest rates are the lowest they have been in forever, the floor of the premium is small, but the ceiling of the loan is also. We had this applied for ten years.

Come the end of May, we had the evaluation done on the house, we were over the required amount and things were looking good. However, when they sent us the new contracts for the loan adjustments to sign, which were while I was in hospital after having a stoke, I noticed the collars were missing. We figured there had been a mix-up, so my wife called.

Nope. No mix-up, we never had the collars.

Umm... WTF!

I almost had another stroke.

Now, I had been adamant about having this collar put on and had several discussions and checked with the loans manager, who assured me it was organized. We went to go through the contracts with her in the office and she went through on a printed copy each point of the contract, including the collar. However, the world being what it is, we didn't sign those printed copies, the approval was done through their mobile app.

We have those papers, complete with the pen marks she used to point out terms and conditions to us at her desk. The problem was, the contract approved on the app and the one that we went through point by point at the loans manager's desk, were different.

So, we have been arguing with the bank over this for over a month now, which has been made more difficult with everyone being on summer holidays. However, they have taken the position that it is our fault for not reading the contract on the phone before signing, even though it was explicitly said that we were going through the same contract at the desk. To make matters worse, the type of collar we had agreed to, they no longer offer as a product, so they said, their hands are tied.

I don't think so.

With my own issues going on, wife has been handling this through email, phone and the app messenger and has been hitting wall after wall, with the options for "solutions" being us having to buy their new product that replaced the old, which is far more expensive and a worse deal, because "times have changed".

So I wanted a face to face meeting, as it is far easier to say nothing can be done in an email than it is when the person you are screwing over is standing in front of you.

I didn't get the meeting, but I did get a phone call.

My wife was dubious about me handling this and said, "Shouting doesn't help" several times. She doesn't peg me as a very good negotiator, yet consistently forgets that she and I are married and she is several levels out of my league.

We had a bit of a discussion and a slow reiteration of what has led to this situation, including the point we failed by not reading the digital version of the contract before signing, but the several points of failure on their side in regards to that contract contents and how it can't possibly be normal practice nor legal. I also mentioned that I would prefer this to be sorted out personally and amicably and not have to go to some kind of arbitration, as it has already been stressful enough having to deal with this after being guaranteed we were covered, the person said,

"No guarantees, but I think I will be able to push for a suitable solution."

So finally today, I got a call from the bank saying that they will be able to give us the collar we agreed to originally after all, but the floor and ceiling rates will be slightly higher and lower respectively.

As said, I don't mind paying slightly more for the collar now as protection, especially if the interest rates do start to climb in the next couple years, as I expect they will. They don't have to climb very far for the collar to come into effect and they don't have to be above it for long for us to break even. I don't know what will happen in the future and there may be extended negative interest rates, but I also am making the play that I will be able to pay off the house within the ten years anyway, instead of taking the loan to full-term.

If the future of the economy does become more volatile, so does employment opportunities for my wife and I, which is bad at the best of times, but worse if interest rates and inflation are simultaneously increasing monthly costs on debt and living expenses. The worst case scenario is that we overpay a fraction for our mortgage, but with interest rates so low, it doesn't make that much of a difference.

With everything going on lately, this has been one more point of stress on us, but I am glad that it is now sorted out and the bank eventually did the right thing, even if we did have to move it up the hierarchy chain a little to get decisions made. A lot of people prefer to do things without having to talk to a person directly, but I suggest that especially in difficult discussions, face to face is a far better option, as it humanizes participants, facilitating better solutions for everyone.

Taraz [ Gen1: Hive ]