25 Jan, 2008
Published: 12:13 Friday 25 January 2008
By: Lorna Bourke, Money Columnist
little known clause in many mortgage contracts could put the homes
of mortgage holders at risk if they default on a personal loan.
Financial website Moneynet.co.uk has warned that many people are
not aware of an 'all monies charge' which appears in the small
print on some mortgages -notably some offered by Barclays and HSBC.
This means that any debts, including overdrafts and personal loans,
taken out with the same lender are secured against the borrower's
'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,' commented Richard
Brown, chief executive of Moneynet.
'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 an unsecured
loan,' he warns.
The 'all monies charge' clause in the mortgage agreements of some
lenders means the lender secures all debt against the mortgaged
property, including any additional borrowing such as personal loans
This means they are entitled to repossess the property should the
borrower default. Whether they would do so for small arrears is
doubtful, but it still represents a worry for people who believe
that the personal loan is not secured against their property.
It is important to understand that this is only the case where the
personal loan or overdraft is taken out with the same lender as the
mortgage. 'It's difficult to find out which lenders include this
clause because as you can imagine, the lenders are very cagey about
this,' said Brown.
Mark Beaton, head of residential conveyancing at law 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 lender at an early stage.'