Did My Mortgage Company Rip Me Off?

theChimbles

I'm looking for some advice for my Mum regarding her existing mortgage lender, whom she feels has ripped her off.

Briefly, she had a property with a mortgage and was paying the SVR of 3.5% interest on the loan. Her circumstances changed and she moved out of her property into rented accommodation, but maintained the mortgage on her property with the intention of letting it.

Upon informing the lender of her intention to let the property and asking for ‘Consent to Let’, she was informed that she would have to remortgage the property at a much higher rate. The deal she was offered was at 5.49%, which carried an arrangement fee of £995 and a three-year redemption fee of £1,500. She reluctantly agreed to this deal as she needed the consent quickly as tenants had been found by the letting agent.

More recently, she is looking to remortgage the property (little prospect of selling in this market) to release some equity to purchase another property instead of renting and upon speaking to head office for an outstanding loan figure, was informed that she had not told them she was a landlord and she would have to pay a penalty on her current deal of 1% on top of the SVR, which is seemingly the standard practice when switching from a homeowner ‘dwelling’ mortgage to a BTL mortgage. The Head Office did not have any record of consent to let.

She is now naturally questioning why she was not given this option when she was forced to change mortgages originally (to 5.49%) and is wondering whether she was mis-sold her current mortgage in the local branch.

She has a meeting with the branch manager tomorrow, so if anyone has only advice/experience as to whether the mortgage was mis-sold and what she could reasonably expect in recompense, I would be grateful.

Cheers

poppysarah

Renting a property is a business so she should be paying a business mortgage level on it... And declaring her income to the taxman.

What paperwork does she have relating to the change?

theChimbles

poppysarah wrote: »

Renting a property is a business so she should be paying a business mortgage level on it... And declaring her income to the taxman.

What paperwork does she have relating to the change?

Thanks for the reply, Poppy.

Accept your point about renting a property being a business, but it seems that the policy the bank has recently come back with is at odds with the advice she was given at the time, in that she was sold a mortgage that was much greater than it should have been.

Also take the point on income tax, although the mortgage replayment, capital maintenance, and service charge mean that the letting is not generating an income, indeed it's the opposite.

Unfortunately, not specific paperwork other than the general mortgage papers, which make no mention of it being a BTL mortgage of about consent to let.

angrypirate

theChimbles wrote: »

Thanks for the reply, Poppy.

Accept your point about renting a property being a business, but it seems that the policy the bank has recently come back with is at odds with the advice she was given at the time, in that she was sold a mortgage that was much greater than it should have been.

Also take the point on income tax, although the mortgage replayment, capital maintenance, and service charge mean that the letting is not generating an income, indeed it's the opposite.

Unfortunately, not specific paperwork other than the general mortgage papers, which make no mention of it being a BTL mortgage of about consent to let.

Its only mortgage interest that is tax free. The rest of the income used to pay the capital off the mortgage is taxable

theChimbles

angrypirate wrote: »

Its only mortgage interest that is tax free. The rest of the income used to pay the capital off the mortgage is taxable

My mistake, it's an interest only mortgage. Any advice on the mis-selling?

princeofpounds

She needs to gather her evidence and then see the bank.

If she does not get the result she wants then she should make an official complaint.

Following that she should take the case to the financial ombudsman.

It helps to read all about the ombudsman's process BEFORE making a complaint. It also help to mention the potential of the ombudsman, because banks will often refute complaints for no reason in the hope that the complainer does not know they have recourse to the ombudsman.

I would also suggest contacting a financial journalist in one of the broadsheets who has a consumer complaints column.

Does she have ANY evidence of consent to let?

theChimbles

princeofpounds wrote: »

She needs to gather her evidence and then see the bank.

If she does not get the result she wants then she should make an official complaint.

Following that she should take the case to the financial ombudsman.

It helps to read all about the ombudsman's process BEFORE making a complaint. It also help to mention the potential of the ombudsman, because banks will often refute complaints for no reason in the hope that the complainer does not know they have recourse to the ombudsman.

I would also suggest contacting a financial journalist in one of the broadsheets who has a consumer complaints column.

Does she have ANY evidence of consent to let?

Thanks for the advice. It's along the lines that I thought.

Unfortunately, she does not have any evidence of consent to let, other than the fact that the mortgage rate was switched from a relatively good rate to one which was very poor for no apparent reason. I think the facts speak for themselves.

Orpheo

Another case of BTL genius.

princeofpounds

I think that the switch in mortgage deal does help, although it's not ideal evidence.

She should also issue a data protection request to get hold of all information related to her account, including recordings of telephone calls if possible. I forget the exact terminology and procedure unfortunately.

sonastin

when she told them originally that she was planning to let the property, triggering the change of mortgage, did she do so in writing? If she can prove that she told them her plans at the time, it helps the argument that they sold her the wrong mortgage product for the circumstances that she had disclosed. Much harder to prove if she told them in person in the branch.

kingstreet

princeofpounds wrote: »

I think that the switch in mortgage deal does help, although it's not ideal evidence.

She should also issue a data protection request to get hold of all information related to her account, including recordings of telephone calls if possible. I forget the exact terminology and procedure unfortunately.

Subject access request under S7 of the Data Protection Act. Same one you use for requesting a credit file, off the top of my head.