Bank’s title blunder almost screwed our unit purchase

There is a word I hate a little bit more the more I hear it. It’s a favourite of call centre help desks and online instruction manuals.  The word is “should” and I’ve been hearing it a lot recently.

And this should be a warning to anyone seeking a mortgage, using an existing property as security, to make sure that all the paperwork is in order – including the things you assume should have been done.

Three years ago when we were coming out of the first covid lockdowns, we decided to ignore our own advice to never buy off the plan, an opinion based on the horrific experience we had buying our current home 20-odd years ago.

But we’d discovered an apartment development on the NSW south coast, the developer had a good track record and, in our fevered imaginations, we’d be writing books by the sea and shlepping up to Sydney for the occasional weekend or work meeting.

As completion neared, we contacted a mortgage broker and he lined up pre-approval for a loan from either the Commonwealth Bank or our previous lender, St George.

We went with the CBA and all was hunky-dory until we came to settlement. CBA needed St George to relinquish title on our current home, which we were using as security for the loan.

What title? We paid off the loan eight years ago. Ah, but even though we’d cleared the loan we’d never had the title to the apartment resumed to our names.

Now, we were informed about this two days before settlement.  I called St George and was told this could take up to 10 working days but if I filled in the forms immediately, they’d see what they could do it should be OK.

The morning of settlement, after numerous phone calls, I was told the approval should have gone through. It hadn’t.  We missed settlement that afternoon even though the approval should have been actioned.

It’s at this point the penalty interest of $265 a day kicked in.  Among the new information that we discovered along the way was that there is a thing called PEXA, an online platform through which banks talk to each other … or not.

We also discovered that unless you are an active customer the bank doesn’t call you back.  You have to call them, again and again. And again. Every time you get a different person, you have to answer a different set of security questions and explain your problem all over again and hope they get it. 

The issue was that the CBA was insisting they had put through a PEXA request to St George to confirm there was no mortgage on our home and the latter was insisting they had done so. The official records said they hadn’t.

Two days after settlement was due on a Friday, just before a long weekend, I asked the 20^th call centre operator, who was doing her best to help, to read what it said on her screen.

That was when I realised that St George had cleared title on the wrong address, the unit number ending with a 3 rather than a 5, so the CBA wasn’t picking up the advice.

With only minutes to spare, the loan went through, the property settled and we avoided another $1000 in penalty interest that would have accumulated over the long weekend (but not the $530 plus $300 in legal fees for the previous two days).

The lesson in this, dear readers, is that when you are using a previously mortgaged property as security for a new loan, get your solicitor or conveyancer to make sure your lender has cleared title on it – preferably weeks rather than hours before your settlement is due.

Do that and everything should be OK.

UPDATE: After learning of this snafu, St George refunded the costs associated with the delayed settlement and asked me to participate in a staff training video.