Building Society credited overpayment incorrectly

debbieallan

We have a part interest only part repayment mortgage ending 2020. Our endowment ended in 2012 and was £15K short however we were keen to pay what we had into the interest only part. We are capped at paying in no more than £10,800 pa Went into the local branch of the building society in 2012 and paid in £10800 only to find out 6 mths later that they had incorrectly used it to reduce the capital rather than the interest only. They said they couldn't reverse it and we had actually gone over our limit because they hadn't reduced our monthly payment as they should have but as a goodwill gesture they wouldn't fine us! Every year when the statement comes in we are reminded that not only do we have to find the £15K shortfall from our savings but also the £10+K that was allocated incorrectly. We have made more overpayments since which were allocated correctly and our monthly payment reduced - which I then save in a separate account. However if me or my husband were to die we would have to find £25K rather than £15K as this wouldn't be covered with the life assurance on the repayment side. Every year I phone the building society and they insist there's nothing they can do. Should I contact the Financial Ombudsman?

Money_saving_maniac

I'm no expert but I think the first thing you should do is make a formal complaint in writing unless you have had it back in writing from them already that they can do nothing.

Also raise a formal complaint with them that you have complained previously and they have not followed their own complaint procedures, if you have had nothing in writing from them. I don't know what their complaint procedures are, you can ask for details, but they always include getting a letter confirming the outcome of the complaint.
It sounds to me as if they have not treated your complaint as a complaint, if you see what I mean.

If you have had something in writing from them I guess the FO is your only hope.

dunstonh

However if me or my husband were to die we would have to find £25K rather than £15K as this wouldn't be covered with the life assurance on the repayment side.

Why? If you pay £10,800 off your mortgage, then your mortgage reduces by £10,800 whether it is against the interest only chunk or the repayment chunk.

Life assurance isnt allocated to one particular chunk of your mortgage. It is paid to the beneficiary and they decide what to do with the money.

Should I contact the Financial Ombudsman?

1 - you cannot complain to the FOS without complaining to the building society first
2 - the event you are complaining about is more than 3 years ago and you can be barred from complaint.

Also, it appears your issues are partly due to lack of understanding. Such as an assumption that your life cover wont be enough.

Thrugelmir

debbieallan wrote: »

Every year I phone the building society and they insist there's nothing they can do.

Any shortfall is your issue not the lenders.

We are capped at paying in no more than £10,800 pa Went into the local branch of the building society in 2012 and paid in £10800 only to find out 6 mths later that they had incorrectly used it to reduce the capital rather than the interest only. They said they couldn't reverse it and we had actually gone over our limit because they hadn't reduced our monthly payment as they should have but as a goodwill gesture they wouldn't fine us!

Then this issue was addressed and the matter is closed. Dragging it up now has no bearing on your current situation.

because they hadn't reduced our monthly payment

This was to your benefit. If they had the shortfall would be even greater.

Every year when the statement comes in we are reminded that not only do we have to find the £15K shortfall

What a responsible lender should do. If they didn't you'd be complaining about this. As informs you of what you need to find.

You need to up your overpayments to repay the mortgage.

debbieallan

Yes the overall balance is going down every year with overpayments and I am putting the surplus I would have paid aside however but in my discussions with them they have said that the life assurance (depreciating term) we took out through them only covers the repayment element as the endowment element was covered by the endowment policy which is no longer in existence. Because they made the mistake it is a hot potato and I never seem to hear back from them - two weeks ago when I said I would go to the Ombudsman they said a manager would phone me back with some options but never did.

debbieallan

Hi I know that the shortfall is our responsibility and have no issue with that but if they had allocated it correctly and if I died tomorrow my husband would need to pay them £13K to clear the interest only part of the mortgage instead of £23K. The repayment part would be cleared anyway by the reducing term insurance policy. I seem to be the only person who thinks this is an issue

Thrugelmir

The cover afforded by the policy will decrease in line with the original payment schedule. The cover does not fluctuate with the balance owed.