Incorrect mortgage illustration

simmonsn

My daughter recently applied for a mortgage for a new-build, shared equity home. She was given a mortgage illustration (from one of the publicly owned banks) and as this was affordable, she decided to go ahead with the purchase.

She has now been contacted to be told that the illustration was incorrect and they will now require a 20% deposit (i.e. only loan 80% of the mortgage share) and not the 10% they had originally quoted.

If my daughter accepts this, it will wipe out all the reserve she has for carpets, furniture etc. So a home, but nothing in it.

The lender has offered her an overdraft to cover the additional deposit, but understandably she's not happy with that as the interest rate will be higher than the interest rate would have been on the same amount in the mortgage.

Another irritation is that the illustration was given on the basis of a fixed interest rate for 3 years. Now reading the details, it's actually a stepped rate with a payment hike after 12 months.

Does she have any grounds to complain? She desperately wants to go through with the purchase and can't afford to pull out or change lender because of the money she has already committed and their "non-refundable" fees.

All thoughts welcomed.

Nigel

GMS

simmonsn wrote: »

My daughter recently applied for a mortgage for a new-build, shared equity home. She was given a mortgage illustration (from one of the publicly owned banks) and as this was affordable, she decided to go ahead with the purchase.

She has now been contacted to be told that the illustration was incorrect and they will now require a 20% deposit (i.e. only loan 80% of the mortgage share) and not the 10% they had originally quoted.

If my daughter accepts this, it will wipe out all the reserve she has for carpets, furniture etc. So a home, but nothing in it.

The lender has offered her an overdraft to cover the additional deposit, but understandably she's not happy with that as the interest rate will be higher than the interest rate would have been on the same amount in the mortgage.

Another irritation is that the illustration was given on the basis of a fixed interest rate for 3 years. Now reading the details, it's actually a stepped rate with a payment hike after 12 months.

Does she have any grounds to complain? She desperately wants to go through with the purchase and can't afford to pull out or change lender because of the money she has already committed and their "non-refundable" fees.

All thoughts welcomed.

Nigel

If this had been done by a mortgage broker they would be taken outside and shot!!

If your daughter wants a refund of fees then she should ask for this if she has been misled. This may be difficult to prove though.

Was the reduced loan due to criteria at all? As for the 3 year fixed not being fixed she should also question this. Problem with an illustration is it is just that, not an offer. Lender could argue that they did not have all information to hand at first, or any number of reasons.

Worth a chat witht he lender to see what can be done.

Loving the loan offered for a deposit though, very irresponsible lending if ever there was an example of it. Why not just offer 100% mortgages!

simmonsn

Thanks for your prompt comments.

Refund of fees is one consideration, but I tend to agree it could be a battle - already thinking of ways of applying pressure (including MSE!).

As far as I know, the reduction was because of a new lending policy, whereby new build properties require a 20% deposit, whilst shared ownership would be 10%. Apparently new build trumps shared ownership. Why new builds are considered a greater risk, I don't know. Seems more to be a strategy to discourage first time buyers. Little wonder mortgage approvals are dropping.

Fully agree about the loan. Utterly pointless and feels more like another excuse to make money at the expense of the customer. The small saving on the revised repayment schedule would probably not be enough to cover the loan interest.

GMS

New builds are often overvalued due to incentives so lenders are cautious with them. New build flats are almost untouchable for lenders.

I would ask for a refund and speak to a 'Whole of Market' broker in order to move forward. If the bank decide they were unaware of the new build element initially you could be in for a battle. They may decide to settle though, especially as they kind of offered an apology in the form of an overdraft facility to allow it to happen.

Good luck

_Andy_

simmonsn wrote: »

Why new builds are considered a greater risk, I don't know.

Because they perform badly, lose value quickly and are often over-priced. This represents a higher risk to the lender in the event of a repo.