Lending into Retirement - Poor Advice

Posted on 15 September 2010 by Katherine Elliott


My father received a mortgage consultation in 2008 from an independent mortgage broker who in my opinion provided inappropriate advice, leading him to switch lenders (from Northern Rock to Santander). The broker neglected to tell him that the loan would have to be repaid in full in 2013 (his previous mortgage was to run until 2026) due to his age (he will be 71 in December - the mortgage is approx £73k on a £200k house). There is no possibility of him being able to pay this amount by then and he does not want to downsize or take out equity release as he wants the house to be our (my sister and I) inheritance. 

He has spent a considerable amount of time contacting various financial advisers, bank managers and Santander itself and has been faced with the same response – despite having sufficient income to make mortgage payments; he is not eligible for a mortgage due to his age.

 Would it be possible for me and my sister to take the mortgage over so that he can remain in his home, or would you recommend the Halifax Home Retirement Plan? I already have a mortgage (155k, no equity in the house); my sister does not have a mortgage.

Katherine

Have you or your father complained to original Mortgage Broker who gave him the advice? If not, this must be your next step. If you have and have not been able to reach a satisfactory settlement your next step will be the Financial Ombudsman Service. This is a free service and they can be contacted on 0300 123 9 123 or

It strikes me that you have a couple of grounds for complaint. Firstly the reduction in term as stated and secondly how was your father going to repay the mortgage? If the mortgage had been arranged on a Capital and Interest basis this would not have been an issue as the mortgage debt would gradually be repaid. I suspect that this was not the case because the monthly payments required to repay the mortgage in 5 years would have been very high. In which case the adviser had a duty to ensure that your father had the means to repay the entire mortgage debt at the end of the term. This could have been a savings or investment plan or the sale of the property.

It may be possible for you and your sister to arrange a new mortgage to repay your father's or to arrange with Santander a transfer of the existing mortgage into your names. This will depend on whether you have sufficient income to support the new mortgage in addition to any existing commitments and your credit records. Their will be a limited number of Lenders who are happy to look at this and you father will have to sign a consent form waiving his rights of occupation in favour of the new Lender. However, it should be possible.

I regret that I am unable to comment on the Halifax Retirement Homeplan as it is classified as an Equity Release mortgage and we do not hold the necessary permissions to advise on these. I can say that unlike most Equity Release arrangements, you do have to make monthly interest payments and the mortgage is not repaid until the sale of the property takes place.

I recommend that you make sure that you use the formal complaints procedure, enquire with Santander whether or not the mortgage can be transferred into your names and the term extended and then speak to an independent mortgage broker.

Peter

www.financial-ombudsman.org.uk/default.htm .

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