press release

A LITTLE known clause in some major lenders’ mortgage agreements could lead to homeowners losing their property should they default on any additional borrowing, warns personal finance data comparison site Moneynet.co.uk.

Far from being an unsecured loan, further borrowing or an overdraft with their mortgage lender could in fact be secured against their property if the original mortgage agreement included an ‘All Monies Charge’ clause.

“It’s shocking that borrowers who believe their additional borrowing is safely separated from their mortgage are actually agreeing to risk the security of their home – something many people would never consider doing,” says Moneynet.co.uk chief executive Richard Brown.

The ‘All Monies Charge’ clause in the mortgage agreement documents issued by some lenders means the lender secures all debt against the mortgaged property, including any additional borrowing such as personal loans or overdrafts. This means they are entitled to repossess the property should the borrower default.

“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 unsecured,” he says.

In a year which could be a challenge to many homeowners as the economy faces turbulent times, awareness of this silent but deadly clause could make the difference between losing and keeping their homes.

“Anyone in the process of taking out a mortgage should ask their solicitor to find out if the lender applies an ‘All Monies Charge’,” adds Brown. “If they do, it’s worth asking the lender to remove the offending clause.”

Mark Beaton, Head of Residential Conveyancing and a partner with East Anglian firm Ashton Graham, said: "This issue is not always investigated by a borrower and can come as a surprise at a later date. I would therefore advise clients to raise the question with their mortgage broker or potential mortgage company at an early stage."

Brown concludes: “If the lender refuses to remove the clause I would recommend finding a lender that does not include this exacting requirement. If this isn’t feasible, at least borrowers will know that any additional borrowing must be sourced elsewhere in order to protect the security of their home.”

* BBA/BSA data, April 2007