Mortgage Payments Hike

RodColin

In 2010 I was made redundant at the age of 59, and from my modest payoff, paid a lump sum towards my £66k Nationwide mortgage which was scheduled to be repaid by my 65th birthday.  My aims were to save interest and to reduce my monthly payments, as I realised there would be difficult years ahead.  My balance and monthly payment were accordingly reduced, and my overpayment was treated as an 'Underpayment Reserve', shown on subsequent statements, and I was told that if I struggled to make payments some months, those payments would be credited from this 'Reserve', i.e. it would simply be reduced by this amount.  

All continued as normal for the next 2 years.  Then life began to get very tough due to lack of income (I was only able to do part-time work), some mortgage payments were missed in 2013 and very little was paid in 2014.  No issue was raised with me and 'Reserve' was simply reduced by the missing payment amounts as promised.

By 2015 the 'Reserve' was running low, then they suddenly started hiking my monthly payments every few months by alarming amounts.  The purpose of this was apparently to 'catch up' so that the mortgage would still be repaid on my 65th birthday in October 2016.   I partly understand this now, but was very concerned that this had not been explained to me at the start.  I was relying on my mortgage being paid at age 65.

The mortgage payments continued to rise, to unaffordable levels, and consequently in early 2016 I was reluctantly forced by my cashflow to take a 'ten year fix' with the Nationwide, thus reducing my mortgage payments back to affordable levels, but extending the mortgage by 5 years, so that it is not repaid till I am age 75!
Unbelievably now, my initial reaction was relief that the mortgage payments were now sensible again and that state pension would be received.

However, I feel aggreaved now that I am still paying £315 per month (my largest monthly outgoing) for a mortgage that should have been paid last October, and will be paying this (or more) for the next 4 years.  This feeling has been heightened by the current cost-of-living crisis.

I still have all my mortgage statements.  Do I have any case or form of redress to the building society, for not explaining in 2010 or later the consequences of using my 'Reserve', and for the fact that I now feel no benefit for having made that lump sum, indeed am effectively much worse off for having done so - ?

RelievedSheff

I would say no.

I'm not sure on what basis you expect any redress!!

sully1311

It sounds like the Reserve has been used exactly how it's supposed to. I'm not sure what you're complaining about, to be honest. 

biscan25

I too don't really understand the complaint. By paying the lump sum off, and building up the reserve, you have paid out less in interest. Did you expect to be able to not make all your payments, and the mortgage be written off at age 65?

In hindsight, the 10 year fix was a good decision, and will have you paying less than the poor souls remortgaging today.

PawelK

One detail I'm missing in understanding this is whether your reserve actually ran out and you went under with more missed payments or was sufficient to cover it before you got right on track with monthly repayments from your income?

If the latter, I would be questioning why your original repayment date/year has been extended. 

RodColin

From a purely personal perspective, had I been able to maintain the (reduced) monthly payments during that difficult 2 years before receiving state pension, it would not have gone up in 2015/16 and would have been all paid last October.  Instead I am still paying it for another 5 years.  This seems a disproportionate 'penalty' for those 2/3 years of flexibility.  It doesn't seem to equate, and naturally I don't feel I was properly advised.

RodColin

No there were no missed payments beyond the limits of the reserve, I was very careful about this.

400ixl

Whilst there were no fully missed payments, there were lost of missed full payments.

If they had allowed you to continue to underpay when your reserve ran out you would have been going into a deficit which no business will be wanting to happen. That could have quickly led to default and re-possession which would have been an even bigger penalty that you have.

They could not let you purposefully get into more and more debt, re-mortgaging to a lower monthly payment over a longer terms was exactly the right thing they should have been doing to protect you and their business.

What independent financial advice did you take if you feel you were not properly advised? The mortgage provider could only advise on their products and processes.

Sorry, but I don't see where you have a claim for anything as I don't see mis-selling here.

biscan25

Actually I think I understand what has happened:

My balance and monthly payment were accordingly reduced, and my overpayment was treated as an 'Underpayment Reserve', shown on subsequent statements, and I was told that if I struggled to make payments some months, those payments would be credited from this 'Reserve', i.e. it would simply be reduced by this amount. 

I didn't realise that your monthly payments had also reduced. So when you did not make these reduced payments, you would have to make these up at a later date, hence the increases in the monthly payment.

I'll give an illustrative example. (Interest is zero for simplicity)

Mortgage 30k
5 years to pay
Say £500 a month before overpayment

Overpayment 15k,
So mortgage 15k and reserve 15k
Payment is now £250 a month

If you paid nothing for 2.5 years, then mortgage is 15k, reserve is zero, and payment is recalculated as £500 a month.

If you paid £125 a month for 2.5 years, then payment would be £375.

Provided your reserve didn't get fully depleted however (and would then be a default), then you would never pay back more than the original £500 a month.


Presumably the payments reached a point where they became unaffordable and Nationwide offered a remortgage to avoid a default?

ACG

You could not or were struggling to afford the repayments on a 5 year term. 
By extending the term it allowed you to reduce your repayments and make things more affordable. You could have still overpaid and brought the balance down - you clearly knew about the overpayment facility. Why did you not do this? 

If you could not afford to, then what you did with nationwide makes perfect sense as the alternative would have probably been to sell up and downsize. If  you could afford to do it, why did you not? 

RodColin

Many thanks for your time and consideration of my question. 

When I said about not having been properly advised, I meant that when I made my overpayment, the building society didn't properly advise me about their processes and potential consequences.  I asked in the course of it what my new monthly payment would be, and the person I spoke to (on the phone) told me, then actually said "but you don't need to pay that, because your overpayment will be treated like an advance payment".  No mention of consequences.  Despite this, I did continue making payments at the set rate for 2 years, until it became hard due to low income.

Just to emphasise that I never got into formal 'default', as my mortgage statements show.  Even when I was making part-payments, I fully expected and intended to return to full payments if or just before my Reserve ran out, and in fact did so immediately.  So they never needed to contact me about a missing payment or shortfall, and never did.  The application for a 'ten year fix' was mine alone, after a conversation with a financially knowledgable friend.

However you say above 'Provided your reserve didn't get fully depleted however.. then you would never pay back more than the original £x a month'.  That was exactly my expectation, i.e. that I would revert to full payments at the reduced level set in 2010 (plus any interest changes since).  The problem was that a few months before the Reserve was used up, they put my payments up way beyond this level (e.g. from £300 to over £400 over a few months).  It was in fact these increased payments that caused my Reserve to be finally used up.

To answer your question, I did not make a further overpayment as I couldn't afford to.  Due to lack of income I had used up my spare savings by 2012/13 through the cost of ordinary living, and that remained the case.

If anything I have explained slightly changes your opinion or advice, please say so.  If not, thank you again.