Bank clearly communicated its loan terms during security swap

Categories:

Advice & information, Lending,

Summary:

In early 2025, Kayla sold her home and bought a lower-priced property under a security swap arranged with the bank. The bank approved the purchase of a property costing up to $630,000. Kayla understood that buying something below this figure would allow her to put the unspent amount towards improving the new home. She negotiated a purchase price of $619,000. The bank limited her loan to 80 per cent of that price and did not release the $11,000 difference to her. Kayla complained that the bank did not give her fair guidance or clear information during the process, leaving her unable to fund heating and ventilation work, which affected her health and her ability to attract a boarder to help with repayments.

Published:

November 2026

Our investigation

Our rules prevented us from reviewing the bank's commercial judgment in setting its security requirements. We could, however, consider whether the bank clearly communicated its terms or gave misleading information. The bank first referred to the 80 per cent loan-to-value requirement in a call with Kayla in January 2025. It repeated this requirement in three subsequent emails before the purchase became unconditional. We therefore considered its communication about these matters had been clear.

We also found no evidence the bank agreed to release the $11,000 difference or to fund improvements to the home. The correspondence about the purchase price and the size of the loan showed that the bank had clearly told Kayla the maximum purchase price was $630,000. Before her offer became unconditional, it told her the loan could not exceed $495,200, which was 80 per cent of $619,000.

The records also showed Kayla first mentioned her inability to fund heating and ventilation work in a call after settlement. We were satisfied the bank communicated its lending terms clearly and did not mislead her. It also disbursed the sale proceeds in line with what it had told her.