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What is a mis-sold mortgage?

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15/05/2018

28 percent of households in the UK have a mortgage, and mortgage lending in the UK has reached its highest level in 10 years. It’s important to know whether your mortgage was sold correctly to you. If not, you may have a mis-sold mortgage and be entitled to compensation from your broker or lender.

 

What is a mis-sold mortgage?

Mortgages are a type of loan which are taken out either to buy a home, or to release funds from your home for other purposes.

They are classed as mis-sold if you were not offered suitable advice from your financial or mortgage advisor.

You should have a clear understanding of all the features of your mortgage. This includes any risks that might be involved. The Financial Conduct Authority (FCA) states that mortgage advisors must comply with statutory principles to treat customers fairly. This also includes giving sound advice.

If you’re unsure of all the features and risks associated with your mortgage, or you think it might be unsuitable for you or your requirements, it was possibly mis-sold to you.

The problems that can arise with a mis-sold mortgage can include:

  • Incorrect and unfair interest rates.
  • Negative equity.
  • High fees.
  • The inability to pay back your mortgage, which could ultimately lead to repossession of your home.

 

How do I know if my mortgage was mis-sold?

There are many ways you could have been mis-sold your mortgage:

  1. Firstly, you should have received helpful and clear advice from your financial advisor around your mortgage plan. This includes a discussion of how your mortgage will be repaid.
  2. You may have been advised to switch to a different mortgage provider, but not told about the extra fees you’ll have to pay, as well as the commission your advisor would receive from the switch.
  3. Fianlly, if you’ve later found yourself in a situation where it seems unlikely that you’ll ever be able to afford to pay off your mortgage, or your mortgage end-date is after your retirement, it could also be mis-sold.

 

Common types of mis-sold mortgages

The most common types of mis-sold mortgage are subprime, interest only and self certification mortgages.

 

Subprime

A subprime mortgage is a type of loan which is often taken out by individuals who have a poor credit score. However, your advisor may have mis-sold to this to you when your credit score could have actually enabled you to take out a better mortgage which has lower rates and fees.

 

Interest-only

Interest-only mortgages enable borrowers to only make payments towards the interest attached to the mortgage. This means that the monthly payments are lower than other types of mortgages. Once the interest-only mortgage nears its end, you will be responsible for paying a large final capital repayment. Your advisor should have made this clear to you right from the start when you took out your interest-only mortgage. If they didn’t, then your mortgage was mis-sold.

 

Self certification  

Self-certified mortgages were often sold to people as an attractive mortgage plan. This is because you don’t have to provide evidence of your income. However, they are often mis-sold as advisors can also earn high commissions from selling this type of mortgage to people. As they don’t require evidence of your income, they don’t necessarily take into account what you can afford to pay back.

 

If you think your mortgage was mis-sold to you, we can help. Get in touch with our expert legal team today.