Bad Advice From Mortgage Lender Costs Us Thousands

Financialnumpty_2

Evening all,

Quick question from a long time lurker in a bit of a tight spot, we have received some bad advice on our mortgage from a mortgage adviser at the bank we borrow from.

The advice was basically duff, they told us that if we overpaid our mortgage, the terms and conditions of the mortgage meant that we could then extend our mortgage by that amount, subject to loan to value amount and their other ts & cs. Effectively that if we paid off £10K of the capital, that they would extend the mortgage amount by another £10K in the future if we needed to when buying our next property.

The person that gave us that advice only worked for them for a short period, and has clearly now either been fired or left because they didn't know what they were doing. We only discover this today, the original advice was given several weeks ago.

So, cut a long story short, instead of the arrangement we were expecting, where the £35K we can overpay the mortgage means that we can extend it £35 from its current value (we meet all the other ts & cs, loan to value etc) they are now advising that we can't have that at all, and the person we spoke to should not have told us that.

We have had an offer accepted on a house based on this advice, our solicitor is instructed, and money is being spent, as always with house buying and selling, like water.

They are now advising that we'd need to take out an extra loan to meet the additional amount that we need in order to buy the house, but they are not offering us the same rate as our current mortgage, this will be 1% higher than the rate we are currently paying.

Over the lifetime and amount of the mortgage, 20 years and extra £35K loan, that could be thousands and thousands of pounds.

We want the deal that we were offered by the financial adviser, and that was explained to us.

Anyone got any clue where we stand? I imagine the bank is going to tell us that the advice was incorrect, and that the only thing that matters is the printed ts & cs on the mortgage, and that they take no responsibility for what the adviser said.

We think they should honour the advice given, because otherwise it will cost us thousands for their bad advice, and our offer for the house would not have been what it was - it also has the potential if we couldn't afford the additional loan cost of costing us hundreds in fees, surveys, time and effort already spent, because the purchase would fall through.

Meeting with the bank next week, and I'd like to go in armed with the legals on this, because I get the feeling they aren't going to do what I want them to do.

Thanks in advance for all help.

BoGoF

If you have no evidence of what you are saying then I can't see you have a leg to stand on I'm afraid.

Senior_Paper_Monitor

I think what they are going to tell you is that you weren't advised !

Check the front of the KFI/Offer to see what it says about this.

Which bank ?

dunstonh

Mortgage advice is regulated. So, all you need to do is provide a copy of the written report that gave you that advice and you have everything you need to make a successful complaint.

If you didnt get written advice then you effectively didnt get advice unless you can show something to prove otherwise.

Financialnumpty_2

BoGoF, absolutely - we are reviewing the documents the bad adviser produced to find evidence of this in worked examples. We may have something written down, but not sure yet - nothing has been thrown away, so if it is written anywhere, we have it.

Senior Paper Monitor, we weren't very well advised at all. Unfortunately decisions were made based on the bad advice, assuming that a simple question asked of a trained professional can be relied on. Obviously this isn't the case, we should have known better. Bank is Nationwide, but mortgage was transferred from Portman when they bought them out. They seem pretty keen to avoid honouring the Ts & Cs they are stuck with from the Portman mortgage, by not allowing us to extend it, we like the Ts & Cs on the Portman mortgage, that's why we took it out.

InMyDreams

So what is it you are trying to do? Take out £35K and then port the whole lot over to the new house? What are the figures here? Is the problem that now that house prices have dropped, the LTV on your current house won't support you taking £35K back out? Would what the 'adviser' was suggesting have worked if house prices hadn't dropped?

Financialnumpty_2

InMyDreams, we are basically paying off £35K from the capital, it was explained to us that if we did this, when we sell the house we get back the £35K in cash (from the sale) and then can increase the mortgage amount by £35K. That means we can afford the new place, which is £70K more expensive than the current property sell price. We have £35K cash plus the £35K extra mortgage required to do this. The value of houses isn't part of the problem - the current property hasn't gone up or down much, and the house we are looking to buy isn't going up or down really.

The issue is that we were offered an extra £x mortgage at our current rate (2% above base rate) and now they won't do it, and are offering us the £35K at 3% above base rate, which is the current best deal they say they can do.

It seemed improbable, so was queried at the time. The adviser went to check with another mortgage adviser, who confirmed this for us.

This now seems to be simply untrue and should not have been suggested, but we would like them to honour their advice and give us the additional £35K at 2% above base not 3% above base.

We know how lucky we are to have 2% above base rate on a mortgage as flexible as we have got.

Financialnumpty_2

To add to this, we've worked out that over 20 year mortgage, the 1% difference will cost us an extra £5,315.

Not massive figures in the scheme of things over 20 years, but we can't really afford to spend £5K that we don't need to spend, and hadn't budgeted for this in our monthly outgoings.

In my mind, the adviser basically told us that we could have a deal, we can't actually have that deal, and their advice is now going to cost us £5,315. Whether or not we could have actually done that deal, our offer for a house would be a bit different if we knew that we'd be paying the extra amount each month, and we'd been working with numbers that weren't correct as a result.

hcb42

I cannot understand what you are trying to do.

Could the adviser have meant that if you overpay, you would effectively have more equity which is important when you want to sell and get next mortgage?

TrickyDicky101

It sounds to me as if you are saying you have £35k equity in your current property as a result of overpaying this mortgage balance in the past. You now wish to borrow back this £35k to give you £35k cash in your hand (which, please note, will automatically increase your outstanding mortgage balance by £35k - ie it's a zero sum game) AND then borrow an ADDITIONAL £35k on top of this? If I have this right, then you are wishing to extend your mortgage balance above and beyond the original amount you borrowed on this Portman mortgage. I would think it highly unlikely that this would have been a feature of the original mortgage.

InMyDreams

Financialnumpty wrote: »

InMyDreams, we are basically paying off £35K from the capital,

You are paying it off or you have already paid it off? If you haven't already paid it off, then don't! And you still have the full mortgage balance that you can port (I assume) at the rate you want to and you can use your cash as the deposit.

Financialnumpty wrote: »

it was explained to us that if we did this, when we sell the house we get back the £35K in cash (from the sale)

This is what will happen if you pay off £35K, you'll then have £35K extra in your pocket when you sell and you will have reduced your mortgage by £35K.

Financialnumpty wrote: »

and then can increase the mortgage amount by £35K.

What mortgage? You've just sold your house. That's the bit I don't understand. Why overpay by £35 just so you can get it back again when you sell?

Financialnumpty wrote: »

That means we can afford the new place, which is £70K more expensive than the current property sell price. We have £35K cash plus the £35K extra mortgage required to do this.

So you currently have £35K plus the £35K you want to use to overpay your current mortgage or are these £35Ks one and the same?

Surely you need £70K cash in *addition* to your *current* mortgage debt if you want to buy a property £70K more expensive.