House fire gutted property, Mortgage Company won't waive early repayment charge

TRiverdale83

I have a buy-to-let property, the tenants started a fire by accident and the house is completely gutted. I am also suffering with many symptoms and severe fatigue due to post concussion symptoms, so I am not well enough to oversee a renovation. Approx 18 months left of fixed mortgage term. Mortgage company won't waive early repayment charge, even though I gave evidence of house fire and ill health.

Is it worth contacting Financial Ombudsman? It seems harsh to have to pay a fee to sell when someone else burnt my house down, and I can't live in it nor rent it in it's state. Considering the relatively small number of house fires gutting properties, surely the mortgage company could waive the fee in these unusual circumstances?

Anyone had experience of this?

user1977

Fires, and your own health, are unfortunately your risks to bear and to organise insurance against if appropriate. And lots of people end up redeeming mortgages earlier than expected for other reasons. I can't see the lender is doing anything wrong.

silvercar

Will your insurance cover the ERC? I’d be tempted to write to one of the newspapers’ help with your money stories. They often like these sort of stories and are possibly better at getting a good will result with the publicity it brings.

theoretica

The fire wasn't your fault - so you don't want to pay,  But it wasn't the mortgage company's either.  Have you tried to add it to the insurance claim as an associated loss?

RelievedSheff

Don't you have insurance for such events?

MX5huggy

RelievedSheff said:

Don't you have insurance for such events?

Can’t imagine many people do. Yes house insurance covers the renovation of the property but not a random fee charged by the mortgage company for redeeming the mortgage early. 

penners324

Surely the insurance is there to rebuild the house and possibly different insurance to cover loss of.earnings?

MWT

I'm not sure how insurance is going to help with the ERC.

Repairing fire damage is going to be covered, loss of earnings also if that cover was obtained.

Deciding to end a mortgage early because the OP no longer wants to own the property is not an insurable risk as far as I can see.

The lender has a real cost to cover and no reason to waive the ERC and take the loss themselves.

Being in business has risks attached, being a landlord is just as much of a business as any other and nobody should be expecting a lender to treat them any differently to any other business.

DullGreyGuy

MWT said:

I'm not sure how insurance is going to help with the ERC.

Repairing fire damage is going to be covered, loss of earnings also if that cover was obtained.

Deciding to end a mortgage early because the OP no longer wants to own the property is not an insurable risk as far as I can see.

The lender has a real cost to cover and no reason to waive the ERC and take the loss themselves.

Being in business has risks attached, being a landlord is just as much of a business as any other and nobody should be expecting a lender to treat them any differently to any other business.

When an insured doesnt want to rebuild the property and just get rid of it then insurers have been known to settle the claim as the difference in sale price of the home in its pre-accident state and what it actually sold for. 

As you say, total losses of properties are fairly rare and having only been involved in Home claims where they are connected to motor vehicles and/or executive complaints my exposure to them is even less so I cannot say how many insurers take this approach nor if they'd consider anything like the ERC as part of the claim. Ultimately if the cost is below their rebuild estimate they might as they are still getting off lightly.

There is a case on the Ombudsman's site of someone's ex-husband coming into his ex-maritial home, covering himself in petrol and lighting a match. This claim was ultimately settled on the basis of the difference in sales price and that wasnt under contest, the point of conflict was if the claim should be covered as a deliberate act of someone named on the policy who had documented psychiatric issues. 

MWT

DullGreyGuy said:

When an insured doesnt want to rebuild the property and just get rid of it then insurers have been known to settle the claim as the difference in sale price of the home in its pre-accident state and what it actually sold for. 

That is a different, but valid point, and although it is unlikely that the insurer would specifically consider the ERC, the insured can factor that into their calculation to see if it stacks up financially to agree a settlement figure to close the claim on the basis that the property will be sold 'as is'.

ACG

Having a BTL is a business, you are treated as a business owner. Consumer rights do not exist when dealing with a business
I cant see the ombudsman getting involved, I am not even sure they can. 

You say not many houses will burn down each year, but what about all damaged properties? Leaks, fires, trees falling over and whatever else - they would all fall into a similar category. 

Your insurance may cover your costs though. Worst case scenario I think you can put the ERC down as an expense so could potentially help reduce things like CGT or income tax (but get advice from an accountant).