The curious case of late penalties for refinancing.This client did a refinancing, so after the law firm served the notice to the bank, the bank reverts with the initial redemption notice with all the outstanding figures and also a later completion penalties.

Curiously furiously the client demands to know how the figures are derived and why is there a late penalties.

“I paid on time, how come got late penalties ah?”

Here’s a simplified process of refinancing :
  1. The client contact the law firm to do a refinancing.
  2. Law firm collect all the documents and details (ie NRIC, Offer letter, check current loan details).
  3. Once determine all the dates and confirm the details, law firm serves a 3 month notice to the bank.
  4. Bank will revert with initial redemption statement.
  5. Law firm prepares the mortgage documents and meet client to sign and collects the Cashier’s order.
  6. On completion, new bank monies will go towards paying off the current bank.

In this instance, the issue is at point 4.

The statement shows an amount higher then what the client expected, and there’s a late redemption penalty too.

So the explanation was, it’s a initial redemption figure at this point of time, the amount will slowly be reduced as client continue to service the loan, so on the day of completion, it will be much lesser.

As for the late penalties, its an internal projected amount from the bank’s side, if you continue to service the loan religiously, you will not be seeing it on the final redemption statement.