The recent cyclone and flooding have raised the issue of how lenders deal with loans if the security property is flooded or damaged between the date of loan approval and funding. Separately, has the borrower’s capacity to repay the loan been affected by damage to a business or loss of employment?

Can a lender withdraw the loan offer or restructure the loan because of serious damage, reduced value (through being flood affected) or reduced capacity to repay?

It all depends on the terms of the loan application, loan approval and the loan agreement. Is there an obligation by the borrower to notify you of material adverse changes and what are the lender’s rights?

Is the loan to value ratio affected? Can the mortgage insurer refuse or withdraw cover?

If the borrower is buying the property, do both buyer and seller have adequate insurance cover?

The situation may vary depending on whether the security is residential or commercial property and whether it is tenanted.

Langes+ can review your documents and advise you on your obligations and options.