After taking out an interest-only mortgage, Amelia and Frank were unsure if they’d fully understood the terms and conditions.
What happened
After visiting a new housing development, an on-site broker advised Amelia and Frank to take out a ten-year interest-only mortgage.
Years later, Amelia’s father complained that the couple hadn’t understood what they were signing up to. And when they decided to sell their flat, the market value was lower than the outstanding mortgage balance.
What we said
We looked into Amelia and Frank’s situation. At the time the couple took out the mortgage, they were both in low-wage jobs. Amelia, who had learning difficulties, was living with her parents and Frank was renting. In our view, they couldn’t have afforded to save towards repaying their mortgage.
From what we saw, the broker hadn’t done enough to explain an interest-only mortgage.
And it looked as though Amelia and Frank wouldn’t have been able to afford any type of mortgage to buy a property in that area.
We upheld their complaint. We told the broker to refund the costs of setting up and ending the mortgage.
We also asked Amelia and Frank to try to sell their property for its market value within a year. If they did, we said the broker should pay the difference between the selling price and the balance of the mortgage.