HELP - Interest only mortgage purchased when I was 19

rigbyj03

Hi, 
I purchased a property in 2002 - peak of the house prices. A 2 bed terraced at £97,000.

I was only 19 and used a local mortgage broker to get me the mortgage.
I was working earning 26k a year at the time.

The mortgage I was recoommended and encouraged to go with was with TMB and was interest only.

I was totally uneducated at the time in what interest only meant. I checked if the monthlys were affordbale and went ahead. (I'd been homeless since 16 so buying a house was a huge thing for me)

I've only recently understood how badly I was misled in this mortgage 22 years later it's now worth £80k (so negative equity) and costs me £795 a month (currently tenanted). I've paid nothing off it in all that time despite monthlys of 798£.

Can someone please advice can I take any action towards misselling?

Ive contacted TMB multiple times over the last 5 years saying I can't afford it and I need help. But theyve said as they don't sell "new" products they can't help me.

I can't get a remortgage as I'm not earning enough money now as a single mum of 5 with another primary mortgage to pay. 

I really need to some help and advice.

tacpot12

Is the mortgage broker you used still in business? You might be able to complain to them if they 'sold' you the mortgage. You might also be able to discover via them how you were supposed to be repaying the mortgage. In theory they should not have been able to see sell you a mortgage without you also being sold an investment that would repay it.

Did TMB write to you to ask how you were going to repay the mortgage at any point? If they didn't, then you might still be able to complain to them and get some redress. 

However, my suspicion is that any compensation or restructuring is going to be constrained by the fact that you could not have afforded to repay the mortgage.

Have you spoken to a morgage broker about getting a repayment mortgage now? There is still time for you to buy the property with a  repayment mortgage. I think I would try to find some professional advice about suing TMB, and you might start by talking to your home insurer (assuming you have legal expenses cover) as part of your policy. 

Mark_d

Similar to you I took a £98k interest-only mortgage in 2003.  Being interest only meant that the monthly payment was very low.  It was significantly cheaper than renting but it saw it as broadly equivalent - in that I wasn't building up equity.

The low monthly payments allowed me money to spend on furniture and general life whilst my salary was modest £23k-£27k.  Once I was more established in my career I committed to building up investments to be able to repay my mortgage.

More recently due to the interest rate I could get on interest-only vs. repayment mortgage, I remortgaged to a repayment mortgage.  I can no longer make significant investments but maybe I don't need to.

I can't comment on whether you were or weren't mis-sold an interest-only mortgage but hopefully my own experience shows that there are advantages to interest-only mortgages.  If you believe you were mis-sold then hopefully you find this useful:
https://www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/interest-only-mortgages-explained-as8wK3R8jnH7#interestonly-mortgage-misselling

It is interesting that you say you can't get remortgage because you have another primary mortgage to pay.  This suggests that you have accumulated some savings/equity but have not reserved that to pay off the capital on the property you purchases in 2002.

sammyjammy

Do the rental payments not cover the mortgage?  Was this mortgage changed to buy to let at some stage?

Edi81

Mispurchased rather than missold. 

What about the statements and letters from TMB asking you and reminding you about it being interest only? 

Didn’t TMB do self cert mortgages plus it was pre regulation. 

MattMattMattUK

I really cannot see how this would be mis selling, the errors do not seem to be on the mortgage lender's side. 

400ixl

I am somewhat confused here.

In order to get the Interest Only mortgage you would have had to show that you had a mechanism to pay off the mortgage in place, I certainly did for my first interest only mortgage a few year prior to your date and things only got tighter from there. Did you sign up to something where you hadn't told the truth back in 2002 about how the capital would be repaid? That would be the first thing I would be checking for in any attempt to complain.

You say that you bought a house in 2002 for £97k on an interest only mortgage and today you are paying £795 per month to service that loan. That suggests you are paying an interest rate somewhere north of 9.5% or suggests you have in the subsequent years remortgaged to a much higher loan than the original £97k.

This house is now worth £80k some 20 years later, which again seems odd for any location to have not grown in that amount of time. Or do you mean that these increased borrowing still leaved you with £80k worth of negative equity?

It sounds like you are leasing this property so assume it must have been converted at some point to a Buy to Let mortgage or you got permission to let under the residential mortgage. How much does the property rent for? It should be bringing a profit, so where is that profit going if it isn't towards some form of investment to pay off the mortgage.

You also mention that you have another property which I assume you have bought since 2002 and is now your main home and on a retail repayment mortgage. How much equity is in that property now and how long is left to pay?

Could you help clarify some of my confusion?

Mr.Generous

sammyjammy said:

Do the rental payments not cover the mortgage?  Was this mortgage changed to buy to let at some stage?

My guess would be on a house worth £80k the rent would be about £600 pcm max - Anything over £800 would be a great yield and therefore make it worth more to an invester.

MWT

rigbyj03 said:

I've only recently understood how badly I was misled in this mortgage 22 years later it's now worth £80k (so negative equity) and costs me £795 a month (currently tenanted). I've paid nothing off it in all that time despite monthlys of 798£.

How exactly were you misled and what is the basis for a mis-selling claim?

Being 19 in 2002 made you an adult at that time and deemed competent to enter into financial agreements, including self-certified mortgages...

Making a poor choice doesn't equate to mis-selling nor does failing to read the documents you were signing and failing to ask questions if there were things you didn't understand at the time.

Waiting 22 years to claim you were mis-sold isn't going to help either, especially when at some point over that time you have managed to deal with letting the property to a 3rd party and obtaining a repayment mortgage for another property... ... those actions don't align with being as 'uneducated' as you say you were back in 2002, so why has this come up now instead of years ago... ?

london21

I am not sure this is a mis-selling more like overpaid when originally purchased.

You could have re-mortgaged all this time and the documents the bank give usually explain interest only etc.

If the property had appreciated in value you would not be dissatisfied. 

dunstonh

I am going to play devils advocate in my response....

I've only recently understood how badly I was misled in this mortgage 22 years later it's now worth £80k (so negative equity) and costs me £795 a month (currently tenanted). I've paid nothing off it in all that time despite monthlys of 798£.

How has it taken you 22 years to realise its interest only?

a) Lenders have been issuing warnings to interest only mortgages for well over a decade.
b) your statements would have had warnings as well as your balance not falling.
c) your conveyancing solicitor would have warned you.

Can someone please advice can I take any action towards misselling?

Mortgages didnt become regulated until October 2004.   You bought before regulation.
At the point you bought, your solicitor would have given you the warnings as they appeared on the contract and you would have accepted those warnings and proceeded.

Some people chose not to take solicitor advice and just do basic conveyancing to try and save money.

currently tenanted

Was it originally or was it residential originally?

I really need to some help and advice.

Put the rent up or sell and take the hit.