Wrong advice from a mortgage advisor

apotocnik

We've taken out a mortgage with Woolwich (fixed, repayment). At the time the Barclays mortgage advisor who was handling the application explained about the current account. Thinking we would never need it I happily forgot about it.

Then, half into refurbishment of the house we bought we started running out of money. Since I've already taken out an additional loan from Barclays we don't really have much more breathing space there. Then I remembered about the mortgage current account overdraft facility. I inquired about this with the same mortgage advisor about 2 months ago. He explained that the overdraft limit would gradually increase as we pay back the mortgage (this turns out not to be true) and that the additional borrowing can go up to 85% LTV.

So today the day finally came when we need some extra cash to pay for the materials and the overdraft limit is still at £100. Naturally I called Barclays and got transferred to mortgage advisors. I had 2 calls with them.

With first call they said that the recalculation of the overdraft is no longer automatic, a few sentences later that it only increases for every £2000 as you repay mortgage but only after a certain period. They couldn't answer what that period was. And at the end that I have to apply for the limit to be changed for which they charge an up-front fee of £150 and it takes 4 - 6 weeks to process. Bit of a problem since we need the money a lot sooner.

I made the second call from a Barclays branch - there were no mortgage advisors on site so they gave me a phone and eventually I ended up with same department - overdraft facility management or something like that. They again gave me same details except this time nobody mentioned the £2000 increases.

After all that I did some reading on the current accounts and it seems the original mortgage advisor has given me wrong information - I have the entire conversation on email luckily. Despite very specific question on what do I need to do to withdraw a very specific amount he hadn't told me I need to apply for the overdraft change, nor that they charge a fee for it and especially not it takes min of 4 weeks!

Copy-pasting relevant lines of one of his replies:
"There is no monthly time period that has to go before you can withdraw more money from your Mortgage Current Account.
You just have to make sure that the funds are available ie that you are within your reserve limits.
Your limits can be seen at any branch computer.
As you pay off your mortgage then your limits will increase and you can take this money out of your account via your chque book or debit card.
Yes the maximum you can withdraw will be up the amount that you inititally took out as a mortgage (85%)."

So this is now a big problem as we need the money in a few days at the most and this would take weeks. Which means we have to put everything on hold for that time!

Has anyone had this happen to them? I know I messed up by trusting the advisor and not researching it but he's supposed to know this stuff! :mad:

Wh05apk

Unless something has changed, I think your first "advisor" is correct, and the other 2 are wrong, from Woolwich intermediaries web site:

"
How does a Mortgage Reserve work?

A Mortgage Reserve is a secured overdraft facility linked to a Barclays Mortgage Current Account, which allows clients with a Woolwich Openplan Flexible Mortgage (OPFM) to borrow against the equity in their home. With a Mortgage Reserve they can choose when to borrow, how to spend their money and how to pay it back.
The amount which is potentially available as a Mortgage Reserve is the difference between the outstanding balance on their Woolwich Openplan Flexible mortgage and up to a maximum loan-to-value of 90% of the client's property. The maximum Mortgage Reserve limit we may currently offer is £20,000 for a new Mortgage Reserve application. All mortgages are subject to status and assessment of the client's financial position

For example, if the total mortgage loan is £80,000 and the lower of the purchase price or our valuation of the property is £100,000 (LTV 80%), the client could have a Mortgage Reserve up to £10,000. This is the difference between 90% LTV of £90,000 less £80,000 and is within the maximum reserve limit we may offer, currently £20,000. Mortgage Current Account Reserves are secured against the home and provided on an interest only basis and must be paid in full by the time the mortgage is repaid."

Nothing about having to reapply and £2k increments, how long have you had your mortgage? I assume it is on repayment?

apotocnik

Hi Wh05apk and thanks for a quick reply.

We've had the mortgage since November 2010 and made 4 repayments - another one due in few days. And it is repayment yes. From advisors - well advice I assumed we can take out as much as we paid in - minus the interest paid on capital to keep it below 85% LTV. The overdraft limit was £100 from start (I can view the limit using on-line banking). But it hasn't changed ever since.

I can't help not to feel as if they're trying to sell us something again.

Wh05apk

If you have only just started the mortgage, it maybe you haven't actually repaid any capital, if for example your mortgage was £100k + £1k fees added, you will probably still owe £100,800 or so, if the limit is £100k, then you are still over it, so probably just got a "token" £100?

hcb42

Did you actually take it out then, if you didnt want it at the time?

I am about to complete remortgage, and I remember being asked on the call did we want it...we said no...it was then explained it would cost more later, we still said no, but I do recall that aspect of the conversation

apotocnik

We've so far made 4 repayments. Mortgage is for £204k with monthly payments of £1200. First one was £2200. So 2200 + 3 * 1200 = 5800 repaid so far. Yes, the fee was added to mortgage itself but that has been repaid at any rate.

helencbradshaw, we didn't "take out" the current account or the overdraft facility. Most Woolwich mortgages come with one by default unless you really explicitly demand not to have one. To explain (providing I understood correctly), it doesn't cost you a dime if you don't use it. It just sits there. You can see it as another Barclays current account, next to your normal current account with a balance of £0. If you are unsure, I would recommend you take it along with your mortgage. You never know when that rainy day comes. If you want to add this feature later on it can be rather costly but if you take it out when arranging a mortgage it's free.

I haven't applied for increased limit on the overdraft yet as that incurs a £150 up front fee. I just want to check the facts first - as posted earlier.

GMS

5800 in repayments will not have reduced your balance by anywhere near that amount.

hcb42

apotocnik wrote: »

helencbradshaw, we didn't "take out" the current account or the overdraft facility. Most Woolwich mortgages come with one by default unless you really explicitly demand not to have one. To explain (providing I understood correctly), it doesn't cost you a dime if you don't use it. It just sits there. You can see it as another Barclays current account, next to your normal current account with a balance of £0. If you are unsure, I would recommend you take it along with your mortgage. You never know when that rainy day comes. If you want to add this feature later on it can be rather costly but if you take it out when arranging a mortgage it's free.

.

I have just gone through the process, in fact second time I have had a mortgage with them.....I didn't want to take it, as I don't need it and don't want it - I just recall it was not there by default....it was discussed (and I certainly never brought it up in that telephone application, they did, they made it very clear - including the fact it would cost if added later, and all these things are scripted)

I am just confused by your OP - you didnt want it so you forgot about it...then you need it weeks later, and I am merely giving my experiences as requested in the OP - which must have been almost the same time as you.

getmore4less

I think your problem is you have not built up your reserve yet

With only 4 payments you will not have paid much off.

I know the reserve does go up in chunks (ours has) not sure where the first incriment is.


The other thing you need to know is the interest rate on the reserve is at the SVR unless you have an offset mortgage.

getmore4less

example £204k @ 4% over 20 years £1236pm after 4months £201,764.05

So only a couple of £k paid off

and with fees etc. your 85% may still be very close.



It is always a good idea to take the reserve up front with Barclays, costs nothing and handy to get back overpayments if ever needed.