Mortgage broker under-applied for mortgage (we suspect)

g.crow

Hiya - long time reader, via Google, first post, though.

My partner and I have been struggling through the house buying process here. We used a mortgage broker, as we are first time buyers and didn't want to hit any pitfalls.

Skip about two months of aggravation and chasing various solicitors - we exchanged yesterday and complete on Friday.

Tonight, we received my solicitors statement for completion. It was higher than expected, and it's very obvious why.

We are doing a 10% deposit on a £225,000 leasehold in London - £22,500 deposit. Looking at the statement, we realised that the mortgage is only for £200,000, not for £202,500 as you'd expect, meaning our solicitors statement is £2,500 higher than we budgeted for.

Yes, this was noted on our mortgage approval letter, but we didn't notice this. Nor was this something we needed to sign - frankly, I was travelling for work at the time and my wife is dyslexic, I should've read it when I got home. We signed a mortgage deed, later, but that didn't have the amount on it.

Here's the thing - we never filled out a mortgage application form - that was all done for us by our broker. We hadn't seen him at the time since we had first applied for our Agreement in Principle. We were awarded an Agreement in Principle for £207,450. Following that, he went off to a music festival, came back, filled out paperwork (reconfirming a few times about critical details such as length of mortgage that we had previously written down, as apparently half our paperwork got shredded while he was at the festival) and basically processed everything without input from us. As such, we never saw that the mortgage was awarded for less than 90%, and neither he nor my solicitor caught it either.

Our assumption is that it was awarded for less because he applied for £200k instead of £202,500. We have no paperwork indicating this as he made the application for us. (We did have to re-fill out the form authorising him to act for us, as that was one of the documents that got shredded.)

As mentioned, we complete on Friday. Consequently, we have scrambled, robbing Peter to pay Paul, in order to get the funds to my solicitor so we can complete on the day. That is, pending bank transfers, going to happen.

Beyond that, what is my recourse here? Do I have any? As far as I am concerned, I'm £2,500 out of pocket and at risk of not paying other bills (such as my closing rent) in order to make this happen, but we didn't learn of this until we had already exchanged. I am of the belief that this responsibility for this lies with my broker, but I am unsure what my options are at this juncture.

Any advice would be appreciated.

kingstreet

You should have received a key facts illustration for the mortgage amount and product you chose, plus a suitability letter which sets out the mortgage applied for and the reasons for its selection.

If you do not have those, request them, plus a copy of the application (there is a summary output from the lender's website) from the broker and then decide on a route of action. This would normally be a complaint to the broker, followed by a complaint to FOS if you are not satisfied with the broker's response.

It would have been usual to request an increase in the mortgage amount and a revised offer if this had been picked up earlier.

magpiecottage

I agree with Kingstreet.

However, it is unlikely you will get £2,500 out of the broker since you would have had to pay it back to the lender in due course anyway and in the meantime would have been paying interest on it which will not now be the case.

If your complaint was upheld, I would expect, perhaps, £250 to cover any distress and inconvenience plus any penalty or interest charges you incur for unauthorised overdrafts etc.

g.crow

Thank you, both.

I'd independently sought clarification from my broker last night, as well as my solicitor. We have the key facts, but we didn't pick up on it until too late, and as far as I know the financial penalty of delaying completion outweighs re-issuing the mortgage (which he has offered to do.)

He has clarified this morning that he reduced the mortgage by £2,500 as we had originally discussed re-investing the Halifax 'we pay your stamp duty' funds into the loan in order to achieve a better LTV. The only difference being, I thought we did that, not him, and there's an outstanding difference of £250 between the stamp duty and the loan.

As it is, the Halifax paperwork is incorrect - they say they issue the stamp duty incentive with the advance, but my solicitor says they never do despite it being explicitly defined in their paperwork, which meant we've had to cover both the stamp duty and the extra £2,500.

I'll continue to pursue with him, based on his response today and the fact that he thought he was acting in our interest I don't think we have a case for the FOS. I did want to know the proper regulator - so thank you very much for that.

wannahouse

pays to read the paperwork!!!
if you've been asked to ok it and sign, then signing is agreeing to the terms, isn't it.
if you're not happy, the time to raise it is before, not after...
shame, never mind, the bright side, even though its a stretch now, is 25 yrs saved interest on that amount!!

g.crow

wannahouse wrote: »

pays to read the paperwork!!!
if you've been asked to ok it and sign, then signing is agreeing to the terms, isn't it.
if you're not happy, the time to raise it is before, not after...
shame, never mind, the bright side, even though its a stretch now, is 25 yrs saved interest on that amount!!

Yea, definitely a case of being pulled in too many directions. I thought I had read it. And yes, as you point out, it means interest saved - now just need to get my repairs done some other way!

kingstreet

g.crow wrote: »

As it is, the Halifax paperwork is incorrect - they say they issue the stamp duty incentive with the advance, but my solicitor says they never do despite it being explicitly defined in their paperwork, which meant we've had to cover both the stamp duty and the extra £2,500

It doesn't always fail to arrive on completion day. If it happened in every case, we'd have complaints ion the bucketloads on here and we've had two, off the top of my head.