What does the priority amount actually mean?
It covers an amount that they have first dibs on, if you owed them that and if the cost associated with selling your house under like a mortgagee sale warrants that figure.
Also remember any kind of guarantees that you put out there for other people’s loans that could be covered in the priority amount as well.
It’s really an indication to other lenders.
Let’s say you get a second mortgage or a caveat home loan or something. Other lenders are aware that if they’re using the property, that first the bank has first dibs on the priority amount.
Why is it set higher?
It’s sit at a much higher figure than what you owe them for two main reasons.
- The amount has to cover any additional costs that might be incurred in a mortgagee sale type scenario, such as unpaid interest, lawyers, real estate and other associated costs.
- If you require a top up on the home loan for things like, a boat, renovations in the future, the higher amount means you do not have to engage a lawyer(to adjust the priority amount).
