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Understanding the Impact of Offset Prohibitions in Mortgage Contracts: Why Customers Should Resist
Are mortgages and credit balances offset?
Mortgage contracts of many banks include a ban on offsetting. Why customers should resist it if possible.
Published today at 06:00
Tricky clause: Since mortgages continue to run even in the event of bankruptcy, prohibitions on offsetting are not in the interests of the customer.
Illustration: Christina Baeriswyl
What about depositor protection at a bank if you have a mortgage with them: Can the mortgage be compared directly with the balance? Reader question from CU
No. According to the Esisuisse deposit protection scheme, the bank may not offset the customer’s debts to the bank, including mortgages, against the customer’s secured credit balances. In theory, according to Esisuisse, credit balances of more than the legally guaranteed maximum of CHF 100,000 can be offset “depending on the individual contractual relationship between the customer and the bank.”
I recommend not accepting a ban on offsetting in the mortgage contracts if possible.
In practice, in recent years, most banks have included a ban on netting in their mortgage terms and conditions. I advise you to study your mortgage contract and your bank’s general terms and conditions. Then see what applies to you. I am assuming that you have a ban on offsetting, since the banks have taken good legal precautions.
Regardless, a mortgage is unaffected by a bank failure. Because the contract continues and you as a customer would continue to owe the institute interest and amortization. You would also have to repay the mortgage when it came due, as contractually agreed. That is why the offsetting ban in the contracts is tricky. I recommend not accepting this in the mortgage contracts if possible, but this is often difficult.
Martin player is an independent economics and finance expert. In the moneyAre mortgages and credit balances offset?
Published today at 06:00 by Martin Player
Many mortgage contracts from banks include a ban on offsetting, but customers should resist it if possible. This tricky clause is not in the best interest of the customer, as mortgages continue to run even in the event of bankruptcy.
According to the Esisuisse deposit protection scheme, banks are not allowed to offset a customer’s debts, including mortgages, against their secured credit balances. However, credit balances exceeding the legally guaranteed maximum of CHF 100,000 can be offset depending on the individual contractual relationship between the customer and the bank.
In recent years, most banks have included a ban on netting in their mortgage terms and conditions. It is advisable for customers to carefully study their mortgage contracts and the bank’s general terms and conditions to understand what applies to them. It is likely that a ban on offsetting is present, as banks have taken legal precautions.
It is important to note that a mortgage is unaffected by a bank failure. The contract continues, and customers are still obligated to pay interest and amortization. The mortgage must also be repaid as agreed when it comes due. This is why the offsetting ban in mortgage contracts is problematic. It is recommended to avoid accepting this clause if possible, although it can be challenging.
Martin Player, an independent economics and finance expert, advises readers on money matters in his daily blog. For advice, readers can write to [email protected].
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How does the offsetting of mortgages and credit balances affect borrowers
Rewritten article:
Title: Are Mortgages and Credit Balances Offset?
Subtitle: The Tricky Clause in Mortgage Contracts That Customers Should Be Wary Of
Published: Today at 06:00 by Martin Player
Image: [Insert Image Caption Here]
Summary: The offsetting of mortgages
This article provides valuable insight into the impact of offset prohibitions in mortgage contracts and highlights the reasons why customers should resist. It is important for individuals to understand the implications and potential limitations these prohibitions may have on their financial flexibility.