So you’ve taken out a mortgage – but you’re starting to wonder whether your lender (or your mortgage broker if you used one) has handled everything correctly?
Trying to work this out can be difficult at times. After all, mortgages can be confusing enough without having to delve into the intricacies of whether your lender or broker has done all that they were legally obliged to do.
But it is an important question to resolve, especially as a mortgage which has been mis-sold can cause you serious financial losses. If you discover that mortgage mis-selling has caused you financial harm, you may be able to make a claim for compensation regarding the mis-sold mortgage.
To help you get an idea of whether you might have been mis-sold your mortgage, we’ve put together a list of some of the most common, tell-tale signs which we encounter. These signs cover some of the symptoms of a mis-sold mortgage, as well as situations in which mis-selling is more likely to happen.
However, you should keep in mind that, even if you recognise one or more of the following signs, they do not necessarily mean that your mortgage has been mis-sold to you. You should always investigate your situation further to work out if you have suffered a loss, and whether you can make a claim for compensation.
You have an interest-only mortgage
Interest-only mortgages have been particularly susceptible to mis-selling in the past. They involve regular payments that are structured to repay the interest being accrued on the mortgage capital, but not the actual mortgage capital itself.
These mortgages hold a number of risks for borrowers and there are strict rules in place to ensure that lenders and brokers advise their customers fully about the nature of the debt they are taking on. In addition to providing detailed advice, lenders and brokers must only sell interest-only mortgages when they have evidence that a borrower has sufficient and reasonable plans for repaying the capital amount at the end of the mortgage.
If your lender or broker did not advise you in detail, did not obtain evidence of your repayment plans, or accepted risky or speculative plans as being sufficient, then they may have mis-sold your mortgage.
You owe more on your mortgage than your house is worth
A mis-sold mortgage can cause some borrowers into fall into ‘negative equity’ – in that the value of their house, if it were sold, would not be sufficient to pay off the whole mortgage amount outstanding on it.
If this has happened to you, it could be because your mortgage lender or broker did not explain all of the implications of your mortgage to you. Another possibility is that they might have secured a mortgage over your house in anticipation that the value of the property would rise. In either case this can constitute mis-selling.
These situations can also happen with interest-only mortgages. For example, your lender or broker may have advised you to rely upon your house price increasing so that you could afford repayment of the mortgage capital at the end of the mortgage.
You have paid large amounts in fees or penalties
If your lender or broker has charged you excessive fees this is also a way in which your mortgage could have been mis-sold. For example, adding their fees on to the amount you are borrowing has the effect of increasing the amount you will be paying interest on.
Lenders and brokers are required to explain to you what fees will be payable and how they will be paid. If you are unsure whether the fees you were charged were reasonable, consulting an independent mortgage advisor or financial advisor can be helpful.
Penalties are sometimes charged by mortgage lenders when you switch your mortgage away from them to a different provider. If you were advised by a broker to switch lenders, but not told about the penalty charges which would be payable, this is often a clear example of mis-selling on your broker’s part.
You did not have to prove your income and outgoings
Lenders and brokers are obliged to investigate and assess a borrower’s ability to afford any mortgage they sell to them. Some mortgages have been offered as ‘self-certification’ or ‘fast-track’ mortgages, in which a lender or broker would not look into the borrower’s finances themselves – instead asking the borrower to ‘self-certify’ that they would be able to handle the mortgage. Such practices are often clear examples of mis-selling.
The principle extends to other kinds of mortgage. Your mortgage may have been mis-sold if your lender or broker did not investigate your circumstances thoroughly or were careless about your ability to afford the mortgage. For example, if you have a bad credit history or your income is insufficient to meet the mortgage repayments – especially when considering your normal monthly expenses – then they will have effectively sold you a mortgage which was unsuitable to your requirements.
You used a mortgage broker and your lender paid them a large commission
If your mortgage broker received a commission for selling your mortgage to you, this does not necessarily mean it was mis-sold. However, very high amounts of commission can raise questions. For example, was your broker’s advice to choose that particular mortgage product motivated more by commercial reasons than by genuinely seeking to provide you with the mortgage most suitable to you? If so, then they will have breached their legal obligations to you and the mortgage could have been mis-sold.
You are due to retire before your mortgage ends
Mortgage repayments are a major monthly expense for most households. If you retire and no longer earn a wage income, it can seriously affect your ability to keep up with these repayments. For this reason, mortgages which continue beyond your predicted retirement age have to be handled carefully. Lenders and brokers are obliged to look out for these situations and to ensure that you will still be able to afford the mortgage payments even after retirement. If they have not explored this with you, or even identified it as an issue, it may indicate mis-selling on their part.
You have remortgaged to consolidate debt
If a lender or broker has sold you a mortgage to consolidate smaller debts into the mortgage capital, they are obliged to give you advice which is appropriate to your circumstances.
Consolidation may not be the right step for everyone. It can reduce the amounts you are paying out monthly but, in the long-term, it may increase the money you have to pay back due to the mortgage capital accruing increased interest over a long period.
If your lender or broker did not address such matters with you, or failed to take into account other aspects of your situation, your mortgage may have been mis-sold.
What can I do if I think my mortgage has been mis-sold?
If any of the above rings true with you, you should investigate further. A good place to start is by reviewing any documents, emails, and letters which you received from your mortgage lender or broker around the time of your mortgage.
It is important to act quickly if you believe your mortgage has been mis-sold. There is a legal time limit of 6 years in which to make a claim and this can run out much more quickly than you might think.
Your own individual circumstances will make a big difference in whether you are able to make a claim for a mis-sold mortgage. Because of this, there is no substitute for expert advice about your specific situation. If you would like to speak to a specialist financial litigation solicitor about your case – for tailored advice with no obligation to proceed further – please get in touch with us at Truth Legal.