grounds for complaint/compensation? misadvised on mortgage

suered

holly/dave

Yes, big time wake up call for them. They have got a much more depressing - and accurate - assessment from a broker who they saw afterwards. As I said in reply to simon, it was that adviser 1 told them that it was their GROSS income that mattered, not net.

Dave - they haven't handed in notice - they're in a rental with no security of tenure and have recently been told to get out in a couple of months. I appreciate that has no bearing on the situation, but just wanted to point out that it wasn't them being silly.

suered

Thrugelmir wrote: »

Then possibly a misunderstanding. They gave the incorrect figures at the first meeting?

Nope, at first meeting they repeatedly told adviser that they were self-employed, gave proof of income, rent paying, accountant papers, etc. Gave exactly the same info to the second one. The icing on the cake is that this is the bank that they have banked with for years.

holly_hobby

But it is gross income that affordability is based on and taken into account .....

You (they) are getting confused between gross PROFIT and NET profit - for SE its always the net profit fig thats the starting point for afforadability calcs (plus trading term of course).

Confusion is reigning everywhere now ... !!!

H x

suered

holly_hobby wrote: »

But it is gross income that affordability is based on and taken into account .....

You (they) are getting confused between gross PROFIT and NET profit - for SE its always the net profit fig thats the starting point for afforadability calcs (plus trading term of course).

Confusion is reigning everywhere now ... !!!

H x

H
yup, they realise that now - but were told that they qualified on their gross income by no 1 and that net figures didn't matter! It was only adviser 2 who put them right and said that they should never have been given that letter (even if it isn't worth the paper it's printed on!)

Anyway, they will put in a complaint and see what happens. At the moment I get the feeling that they'd like to be doing the "retraining" of adviser 1 themselves..................

holly_hobby

Yep ... if nothing else it will make them feel better, and on a more serious note it will give the bank the opportunity to look at the advisers T&C and basic skills (can only think they were an internal promotion, although I know that NW are currently recrutiting nationwide for mge advisers, but AFAIK they do have to be experienced and qualified to at least CeMAP which is a banking mge qualification).

Anyhoo, tell them to keep their complaint letter factual, consise, and to highlight the issues the poor "advice" has caused - and see where that takes them.

Hope this helps

H x

DevCoder

Both advisers need retraining imo.

suered

krisdorey wrote: »

Both advisers need retraining imo.

kris, I'm pretty sure they don't have a beef with the 2nd one. It's the first one that has caused the grief/stress by giving them the impression that it was almost a done deal:

Go forth and search for a property, he said (in the letter he should never have given them)

Come back with an accepted offer, he said (in the letter he should never have given them)

Robert is your parent's brother, he said (yes, I paraphrased that last one again)

If he'd given the same advice as the second one, they would have been disappointed, but at least known their position.

ILW

It appears they did not understand the diffence between turnover and gross profit.

kingstreet

This is more than likely a misundertanding of the difference between gross and net income.

For an employee, their gross income is what they earn before the personal allowance and deduction of tax and NI.

An employee's net income is the residue after the deduction of tax and NI but this does not compare with the net profit of the self employed individual.

A self employed individual's net profit is the halfway point between, it is income after expenses and certain capital allowances, but before the deduction of tax and NI.

Therefore a mortgage lender uses the gross income of an employee and the net profit of the self employed as these are roughly comparable.

In the case in discussion here, the advisor may have tried to explain the above in a way which is understandable to the potential borrower, but frankly, made a complete hash of it.

holly_hobby

Yep, in essence Net Profit is the amount of residual capital (after permitted business and operational deductions) that is available for payment in the form of salary.

For a sole trader it is the net profit that is representative/comparible to the annual salary of an employee.

In all cases for mge purposes, affordability is calculated on the individuals gross salary (ie before appliation of tax, NI), whether thats derived from the net profit from their SE occupation, or their annual earned income, it is this figure that is the starting point for mge affordability purposes (specifically talking about single occupation individuals).

Neither turnover nor gross profit is directly used in mge affordability calcs. (albeit it will be used by the UW to determine how viable/healthy the business is and its overall longevity given the assesment).

Hope this helps

Holly