Was I given bad advice ?

psso

Hi, I don`t usually frequent this forum, but
I wonder if someone can give me some advice please.

I was widowed recently and when the endowment policy was paid out to me, I went to see the bank manager about paying off most of the mortgage (policy didn`t cover it all) We had £30k which was C&I and £15k interest only, both had 4 years remaining.
Bank manager told me I would be better paying off the £30k and carry on paying the smaller one, as it would be a smaller payment.

At the time I obviously wasn`t thinking clearly as there will still be the £15k to pay at the end of the 4 years.
My thoughts now are that I should have told him I wanted to pay off the smaller, interest only part and part of the C&I part, leaving a decreasing amount to pay off.

Do you think I was given wrong / bad advice at the time and if so, is there anything I can do about it now ?

Thanks in advance for any help.

Oldernotwiser

As you're making lower payments with this option, it means that you have the difference to put towards paying off the capital on the smaller loan..

opinions4u

psso wrote: »

I was widowed recently and when the endowment policy was paid out to me, I went to see the bank manager about paying off most of the mortgage (policy didn`t cover it all) We had £30k which was C&I and £15k interest only, both had 4 years remaining.

Bank manager told me I would be better paying off the £30k and carry on paying the smaller one, as it would be a smaller payment.

While this is true, it is one of a range of choice open to you. I'd be surprised if he actually gave advice. I think it's more likely that he explained your options.

At the time I obviously wasn`t thinking clearly as there will still be the £15k to pay at the end of the 4 years.

You are thinking clearly now! It's good that you are aware of this.

My thoughts now are that I should have told him I wanted to pay off the smaller, interest only part and part of the C&I part, leaving a decreasing amount to pay off.

Then talk to the bank again. They should be able to change this in a straight forward way, explaining your options.

Alternatively, you could probably work out how much you need to overpay by and repay capital yourself. Just check that there are no repayment penalties for doing so.

Do you think I was given wrong / bad advice at the time and if so, is there anything I can do about it now ?

I don't think you've been given advice. You have taken a reasonable course of action in the circumstances and are now reconsidering this and looking at equally reasonable alternatives.

Senior_Paper_Monitor

Here we go again ! High Street banks do not give you advice - as Mr 4u states "they will have given you options" (I prefer they line 'they flog you things' which has got me some rabid response in the past).

As Mr Wiser indicates 'you can/should put at least some of the savings towards paying off the remaining interest only loan'.

As to whether the decision was correct, this depends upon seveeral factors including the terms of the two loans, your age/circumstances and future plans.

Sorry to be 'wise (smart !!!) after the event' but proper financial advise would have been the best course - and may still be of benefit.

Joe_Bloggs

It is considered common knowledge that if you have an interest only mortgage then you need a repayment strategy. The capital of the loan will not go away on its own.

As the interest rate has not been mentioned then I assume it to be 5%. The interest only portion would be of 15000 at 5% would be £62.50 per month. If this mortgage was converted to capital and interest over 48 months then the repayments would be £345 a month..

Even if the mortgage was interest free the repayment of capital would still need to paid at £312.50 a month.

The interest only route can give you the greatest flexibility as you can often make capital repayments when you have the money rather than being tied to an inflexible schedule. This can often mean these capital repayments are never made.

J_B.

dunstonh

Bank manager told me I would be better paying off the £30k and carry on paying the smaller one, as it would be a smaller payment.

As already stated, most bank managers are not authorised to give financial advice. The few that can are limited in what they can and cannot recommend. Theirs is a sales process rather than an advice process. Their employer will put restrictions on them. One of the most common is that they cannot recommend cancellation of an existing plan. Or they cannot discuss the products of other providers other than in a generic way.

Do you think I was given wrong / bad advice at the time and if so, is there anything I can do about it now ?

If you dont use an adviser for financial advice then there is little consumer protection available to you. If the options are presented as options rather than advice and you choose one of those options, then it is your responsibility I'm afraid.

dimbo61

Hi psso
You need to dig out all the paperwork that came with both parts of the mortgage interest only and repayment
Check what rates you were paying on both loans
Check the terms and conditions IE any ERC or fixed rate deals ?
You still owe £15,000 and if you can start to overpay each month IF no penalties.
As others have said you need to pay about £345 a month over the next 4 years if you want to be Mortgage Free in 4 years.
So contact you lender and set up a direct debit for that amount.
If you cant afford that much each month then consider paying as much as you can afford in order to be MF before you retire/ turn 65
Good Luck and sorry to hear of your loss

Dan_1976

Hello Psso

Sorry to hear about your loss.

I would normally agree with most of the posts, bank staff dont normally give advice. however none of us happened to be sitting with you when you spoke to the Manager. He may not have been giving you direct advice in the traditional sense. but, his opinion, assuming he gave it, may have pushed you in the wrong direction.

Banks do not document meetings and advice given correctly and all staff have opinions and give advice without even thinking about it.

I would put this in writing as clearly as you can to the lender or FOS or FSA or whoever will listen and try your luck.

It is bad advice it was given in the way you say, if he has not documented this correctly then you could get some sort of compo!

Good luck.

Joe_Bloggs

In these tragic circumstances the choice that was taken provided the maximum amount of freedom for psso. They could have been alternatively burdened them with a 15K repayment mortgage instead they got a 15K interest only mortgage with time to find the money to eventually repay the capital.

If psso had understood the consequences of this at the time then I suspect there would have been no problem. Only psso can say.

We can all walk away from meetings thinking we understand part of what what went on. I often walked away clueless and was just glad the meeting was over. It is only through personal experience that mortgage terminology makes an impact.

I suggest that the one way to be sure that someone actually understands what they are doing is to quiz them on the alternative courses of action.

J_B.