Interest Only - Poor Advice

Posted on 6 May 2012 by Susan


We have an interest only mortgage. Our ages are 60 and 55. We were advised to take this out because, with no rises each for the last 5 years, we were struggling to pay the full repayment mortgage. Nevertheless it was in my view, bad advice for people at our ages to take out an interest only mortgage. We have no plans or savings left because of daughter's wedding so no way can be pay the £140000 which will be owed at the end and no hope of saving that amount. We were advised that no-one would touch us and no other Lenders were interested in taking us on and because she got us in such a state of worry about it we signed the forms. It turns out the Advisers husband was a director of the firm and they have now gone bust and their business has finished. We were also told that if we didnt complete the forms and pulled out that we would have to pay their fees of around £1000 which she knew we didnt have. What can we do and how can we get out of this interest only mortgage as we wouldnt be able to afford over £1000 repayment mortgage per month ?

Susan

As the firm that has advised is no longer in business you should approach the Financial Services Compensation Scheme with your complaint.  This is a free service to individuals who can not complain to the business who provided them with financial advice and are not in a position to provide compensation themselves: 

http://www.fscs.org.uk/what-we-cover/questions-and-answers/

There is no guarantee that they will find in your favour and I would expect them to ask how you thought you were going to repay the mortgage and why you didn't explore other options such as downsizing?

This still leaves you with the problem of what to do now and if you can not afford the mortgage repayments on an interest only basis your lender is very limited in how much they will be able to help.  I think you will have to give serious consideration to selling your home and finding a cheaper property with a smaller or no mortgage.  Before you do this I recommend that you speak to your local Citizens Advice Bureau or the Consumer Credit Counselling Service and ask them to help you draw up a monthly budget planner.  This will help you prioritise your expenditure and ensure that you are not wasting money servicing other debts which can not result in the loss of your home.

Peter

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