Have I been mis-sold my mortgage

Rubychivers

Hi, can anyone help. Just over 5 years ago now I brought my first house. It was a shared equity scheme with my previous housing association. I got a mortgage for 75% and the association lent me the other 25% ( no repayments, simply pay back 25% of value on selling the property). Anyway a year or 2 later we went to see the bank for a review and they said they could lend us some more on our mortgage for debt consolidation, I thought there might be a few more thousand now in my 75% as the Market was on the up still at that point, however I was surprised when they offered us approx £25k, this would cover all our other debt so we took it. It wasn't till a year or so later that I started to realise what they had done. I think the mortgage lender had neglected to realise that there was a 3rd party with equity rights to the property and I think she has lent me the 25% again ( housing associations share) meaning I now owe 125% of the value of my house. House is now at the Market price it was when we brought £117 at best, my Mortgage is £117 but the housing association own 25% equity leaving me in approx £27k negative equity. Do I have a case for a mis-sold mortgage? Thanks everyone in anticipation of your help

withabix

No. You have a very low APR loan which you took out to consolidate. The total loan now happens to be more than the value of your home.

Lenders are free to lend you however many multiples of your property value that they like.

opinions4u

Rubychivers wrote: »

Hi, can anyone help. Just over 5 years ago now I brought my first house. It was a shared equity scheme with my previous housing association. I got a mortgage for 75% and the association lent me the other 25% ( no repayments, simply pay back 25% of value on selling the property). Anyway a year or 2 later we went to see the bank for a review and they said they could lend us some more on our mortgage for debt consolidation, I thought there might be a few more thousand now in my 75% as the Market was on the up still at that point, however I was surprised when they offered us approx £25k, this would cover all our other debt so we took it. It wasn't till a year or so later that I started to realise what they had done. I think the mortgage lender had neglected to realise that there was a 3rd party with equity rights to the property and I think she has lent me the 25% again ( housing associations share) meaning I now owe 125% of the value of my house. House is now at the Market price it was when we brought £117 at best, my Mortgage is £117 but the housing association own 25% equity leaving me in approx £27k negative equity. Do I have a case for a mis-sold mortgage? Thanks everyone in anticipation of your help

Possibly, although only on the grounds that you may be unable to move because of their stupidity - unfortunately Northern Rock customers don't appear to be pursuing cases of mis-sale where they've been lent over 100% of value, so I don't think you'll succeed. A reason for rejecting a mis-sale claim is that you knew exactly what you were doing when you secured this debt on the property.

There are staff working for the mortgage lender who should probably be facing discipliniary action for not getting a letter of postponement from the housing association.

DevilsAdvocate1

Rubychivers wrote: »

Hi, can anyone help. Just over 5 years ago now I brought my first house. It was a shared equity scheme with my previous housing association. I got a mortgage for 75% and the association lent me the other 25% ( no repayments, simply pay back 25% of value on selling the property). Anyway a year or 2 later we went to see the bank for a review and they said they could lend us some more on our mortgage for debt consolidation, I thought there might be a few more thousand now in my 75% as the Market was on the up still at that point, however I was surprised when they offered us approx £25k, this would cover all our other debt so we took it. It wasn't till a year or so later that I started to realise what they had done. I think the mortgage lender had neglected to realise that there was a 3rd party with equity rights to the property and I think she has lent me the 25% again ( housing associations share) meaning I now owe 125% of the value of my house. House is now at the Market price it was when we brought £117 at best, my Mortgage is £117 but the housing association own 25% equity leaving me in approx £27k negative equity. Do I have a case for a mis-sold mortgage? Thanks everyone in anticipation of your help

I don't think you do because of the 27K of negative equity, you used £25K to pay other debts. So you're pretty much is the same situation as you would have been, except the mortgage rate is probably lower than you would have paid on other debts.

Also, the mortgage company has sold you a mortgage - not additional insurance or something that you did not need.

Not sure what you think you should be entitled to claim back?

Rubychivers

withabix wrote: »

No. You have a very low APR loan which you took out to consolidate. The total loan now happens to be more than the value of your home.

Lenders are free to lend you however many multiples of your property value that they like.

So what were they lending me the £25k against, as at best with the mortgage and housing association % there may have been £5 in the property?

Rubychivers

DevilsAdvocate1 wrote: »

I don't think you do because of the 27K of negative equity, you used £25K to pay other debts. So you're pretty much is the same situation as you would have been, except the mortgage rate is probably lower than you would have paid on other debts.

Also, the mortgage company has sold you a mortgage - not additional insurance or something that you did not need.

Not sure what you think you should be entitled to claim back?

The problem is, as opinions4u mentioned, that I am now stuck, I can't even buy a cheaper house to clear debt, or even rent, as I can't pay everyone back. If I still had my original debt that would be ok as it wouldn't need paying back all in one go as the mortgage and housing association would require of me if I were to sell and I cannot get a loan for that amount in one lump sum to replace the original debt.

m_13

Five years ago you took out the mortgage so let's estimate that at 2006.

At some point one or two years after 2006 - so in 2007 or 2008 - you borrowed £25,000.

Your signature says:

Highest starting debt = CCards £17,113.19 + Overdraft £5,200 19th Sept 2009
Now CCards £10,131.13, just over £1000 on littlewoods BNPL 3th Oct 2010

So your highest debt was £22,313.19 (£17,113.19+£5,200) in 2009.

Yet on 3rd October 2010 you say your credit card debt had reduced from £17,113.19 to £10,131.13 a reduction of £6,982.06, you'd paid off your £5,200 overdraft but you had managed to acquire a new debt of £1,000 at Littlewoods.

If £6,982.06 of the £25,000 went on credit card debt and £5,200 went on clearing your overdraft, where did the other £12,817.94 go?

Is hoping that you might have been missold the £25,000 loan part of paying off all your debts and going to medical school this year? Whilst I admire your desire to be debt free and retrain, I don't think this is a feasible way of writing off the debt.

noodle

Rubychivers wrote: »

The problem is, as opinions4u mentioned, that I am now stuck, I can't even buy a cheaper house to clear debt, or even rent, as I can't pay everyone back. If I still had my original debt that would be ok as it wouldn't need paying back all in one go as the mortgage and housing association would require of me if I were to sell and I cannot get a loan for that amount in one lump sum to replace the original debt.

If you had all the other debt elsewhere then you'd still not be able to buy a cheaper house to pay back the debt, as you would still owe much more than your house is worth. You'd have no deposit and a stack of unsecured credit, and have little choice but to rent while you pay down your debts. If you want to do that now then browse MSE for good advice on negative equity.

magpiecottage

From what you say, it looks like the lender has fouled up, as others have said.

However, you can only complain by admitting that you did not realise that this would mean you owed more than your share of the property - which will make you look rather silly.

You would also only be entitled to redress for the extra costs you incurred which would be the interest payments paid on the extra mortgage borrowing minus the costs on the unsecured debts which would, presumably have been higher, giving a negative amount.

Whilst you would not have to repay the difference, you would not receive anything and a complaint to FOS might be dismissed as "frivolous", which my dictionary defines as "silly".

As you are now paying less (there would be no reason to consolidate otherwise), the way forward is probably to increase your payments to what you were paying to all lenders before you consolidated so that the outstanding balance reduces and the negative equity is chipped away.

I do not think your argument that you are now stuck has any merit in it. You have a shared equity mortgage - so you would not seem to be in a position to move anyway