- Hi, it's Connie from Prosperity Finance.
I hope you're doing well.
Now, today I was really lucky to have my friends
Joy Yuan from Turner Hopkins
to share with us a very commonly used legal expression
but I bet you don't really know it well.
So firstly, let's welcome over our old friend Joy.
Hello, Joy.
- Hi
- Hi, how are you Joy?
Happy new year.
- Happy new year.
- Hey Joy, so today,
I was just wondering if you can help us to explain
one common used legal expression,
it's called priority amount.
Now, some banks, when they send an offer letter to us,
they always have a kind of a section called security.
And under that security section,
it has a kind of a description about something
called priority amount.
And a lot of people confused and are asking us
and we're just in a dilemma because we are not the expert,
but we got also have responsibility to make it clear.
So, yeah, I was just wondering if you can help us.
And before that, let's quickly just have a quick
look what that looks like in the letter offer.
Now in here, so obviously I've blackouts the client name
and the property address,
but it's just to show the description that something,
yeah it looks like that the priority amount,
how it looks like in that in the loan offer.
So, Joy can you please help us explain
what that priority amount is?
- Yeah, sure.
So, we will see that offer in the loan instruction
the loan offer as well as when the lawyer is preparing
of the transfer title paperwork.
The mortgage was specified a priority amount.
So, a priority amount is what do we see that bank?
We're always specified that amount of the mortgage
and which is referred is priority amount.
This amount of an exceeding of the actual loan
the client is taking and borrowing from the bank.
And by accepting that priority amount,
it does not necessarily mean that this is
how much you owe to the bank.
And this amount is normally
about 1.5 times of the value of your house.
And it's just to protect bank,
make sure that in all situation,
if the bank and exercise their right to recover the loan
from the clients, and then they can
they add a first ranking, they protect their interest
and can fully recover all the money that you owe the bank.
And for any other second mortgage,
another bank that you will grant you second mortgage
they will be ranking after the first mortgagee,
after the first bank and it will have a priority amount
after the first mortgage, first bank is priority amount.
So, this is just really a way
for the bank to protect themselves
and ensure that in the real event, if they need to conduct
mortgagee sale for that kind of the money
they can be fully recovered of the money that
a client's owed.
And also I will show you
one of the ANI Form that normally people will see
before they sign a loan doc.
So I'll show you an ANI Form that purchasers
sign in front of their lawyers.
So, it's a procedure that before the settlement take place
you will go to a lawyer and sign an ANI Form.
This to and able the transfer and the registration
of mortgage.
On that form, the priority amount, what is specified
and the middle section, you will see a priority amount.
So, in this instance, Mr.Wang is borrowing the money
from the Westpac bank, New Zealand.
The priority amount is 700,000.
This is more than what the money
in the loan they're taking from the bank.
And this is 1.5 times the value of the house.
And this is to ensure in the event, Westpac bank into
mortgagee sale of the house.
Westpac bank can recover the $500,000 loan plus interest
they lend to Mr.Wang and any other creditors
were ranked after that seven hundred thousands.
So, this is just to show how the bank make sure
they're fully recovered from the borrowers
by having this priority amount registered as part
of the mortgage.
This shouldn't affect on the clients.
You don't worry too much about it.
By having a pretty decent priority amount
and show us that if there's an increase of your loan
then you don't need to often go
to your lawyer to update their priority amount.
And that's why sometimes the bank allow a bigger
priority amount in some of the situations.
And you don't have to worry about that
because what you owe to the bank is always
the loan agreement that you signed
and in front of your lawyer.
So, if the loan documents says owed on $500,000
plus interest, this is how much you owe them, yeah.
- Wow, excellent.
So, yeah.
So that means Joy, there's nothing,
you don't really have to worry about that.
It is just for bank protection and for conveniences
for the future in case
you need to top up etcetera.
- Yeah.
- It's nothing to do with how much you owe to the bank,
right?
- That's correct.
- Right.
- In most of the cases, especially residential loan
the client's taking, don't to worry about it
because often you'll see that you can only get one mortgage
from one bank.
- Yes.
- You ain't allowed or consent to two mortgages
over the same property, right?
But for this commercial loan, it's a different story.
You wanna make sure that yeah, sometimes the amount
is accurate or limited, so you won't be able to
entitle to borrow more money for another bank,
but in a residential mortgage and residential loan,
I would say it's pretty common.
And the bank just follow and use similar sort of formula
to have that amount specified.
- Phenomenally it's 1.5 of the property value.
- About that, yes.
- Excellent I learn everyday.
Thank you so much.
Thank you, that's the best explanation.
So, next time I can just share that video with the clients.
And so...
- No problem, yeah, you're welcome.
- Excellent.
Yeah, so Joy it's a very experienced solicitor
And she actually has very extensive knowledge
and experience in the commercial world.
That's why she was mentioning about a commercial.
So, if you have any question about legal matters,
feel free to contact Joy
and I'm sure you will get great help.
Thank you so much Joy again
and I hope to have you back more later this year
Thank you so much.
- Thank you, I think you're so nice.
Thank you for having me. - Bye, bye.
- Bye.
- Thank you, bye.