Mortgage advisor gave wrong advise - can i get my money back?

katrininengland

We are one week before completion and have just found out that we will not have enough money to buy the house we want.

It was extremely complicated from the start because we are porting my partners existing 95% mortgage to the new place and he is getting another buy-to-let on his current flat.

Basically, we need about £20K to £25K to be able to pay some debts and do some work to our new house. This was always clear to our financial adivsor but we have just found out that in fact we will only be left with £10K! We questioned his calculations after our solicitor asked questions that we were unable to answer. We never completely understood how our FA was raising the full £20K but we trusted him. Only after asking him to go through it again we realised that he got it wrong!

Obviously we are hugely relieved that we did find out before completing next week but where does that leave us? We cannot afford to buy the house now because it is not habitable without the work. But we cannot afford the mortgage with the other debts still hanging over us.

Basically we need to pull out and have spent just under £3K on fees, surveys, solicitor...!!!!!

I have nothing in writing from our FA - can we challenge him to pay us back this money?

Please help - I might jump out of the window!!!!

poppy10_2

Did he say in writing that he would get you the £25k?

Rafter

Katrine,

Sounds like you have had a lucky escape if you are stretching yourselves that much at a time when house prices are falling.

If the situation is complicated and you have nothing in writing then I think you have very little come back against your advisor. You had just as much responsibility to check the loans and what you were signing and there is nothing fundamentally wrong with the products you have been sold - it is just the amount of additional cash is less than you hoped/planned.

Don't jump!

R.

katrininengland

Nope, we have all sorts of documents about the mortgage amount but nothing that says how much cash we will end up with.

katrininengland

Thanks Rafter.

I know that the product itself is perfectly ligit. But our FA knew what we needed to have left over all along and told us we were getting it. There must be something we can do?

dunstonh

You are going to have to give us a breakdown of what you were borrowing before, what extra you asked to borrow and the costs.

Without that info we are not going to be able to help you decide if you have a case or not.

_Andy_

Hi

So the BTL remo was to raise money for the deposit and work on the new house and pay off debts, is that right?

silvercar

You say you were due to complete next week, have you actually exchanged contracts yet?

Conrad

Am I coorect to assume you thought the additional money for debt consolodation was to be released from the current property owned? It can only be that way as you wanted just 95% you say of the new property, unless you meant to apply for the additional on the new property which would have been a more expensive 100% deal.

You describe him as an IFA. A dedicated mortgage broker only has one 'trade' to focus on. IFAs do have an awful lot on thier plates, hence maybe why he made the mistake.

1) Turn up in his office and ask for a copy of the FACT FIND. Do not tell him you are comming in case he ermmmm adapts the fact find to suit his defence.

See what that document reveals - in particular are there notes made by him outlining your needs?

katrininengland

We have not exchanged contracts because we are doing a similtaneous exchange/completion.

Here is the breakdown:

The existing mortage is a 95% with a £25K unsecured bit. My partner used £9.5K to pay the full 100% and kept £15.5K to invest in his flat. This has worked well because his flat has grown in equity by about £40K!
He is now remortgaging it to let it and releasing what we thought would be £15K.
For our new place we are porting the existing 95% mortage with a £30K unsecured bit again paying £9.5K. And this is the bit that he never made clear to us - we thought we would then have £20K left over from the unsecured bit and £15K from the buy-to-let. However, because the unsecured bit has merely increased to £30K we actually end up with -£5K (£30K - £25K - £9.5K).
Now, when i first spoke to our FA yesterday he said he misunderstood us and thought that we only needed the £20 in total instead of £35 in total from both mortgages. At the time I was shocked but realised it was a geniune mistake to make from both sides. However, he then called me again and "mentioned" that actually we would only end up with ca. £10K after we deducted the £9.5K to make up the 100%! And this is the problem - he made a genuine mistake because although we may have got confused with the total amounts, he ALWAYS knew that we needed £20! We only thought we would get the extra £15 and be much more comfortable.
The house we are buying will grow in value because it is in a bad condition and once it is done up we will make the money back and more.
The idea was that we sold it in about 1 year and be completely debt free with a small deposit to a new place.

I hope this makes sense. Took me ages to work it out myself.

Conrad

I note your motivation to achieve a good total return but to me the figures dont add up, in fact nearly all clients I've ever known do this dont really make much money, but they dont realise this.

They forget to factor in all the interest costs to include interest on capital balances not covered by the rent on a previous property. Most of the people Ive known also do not factor in all the renovation costs, they somehow forget all those little things that add up to a great deal.