to take legal action over barrat homes "dream home" scheme that has screwed up my life

[twojobsjane]

Back in 2007 we really needed to get a secure house after several very bad rented experiences. We didn't have a deposit so we opted for a scheme with barrat homes where they lent 25% and we got a normal mortgage for 75%/from the Halifax.

We knew at the time that after 10 years we would need to pay back the 25% but were assured by several people that it would increase in value and so could just remortgage with the equity to pay this off.

Fast forward 8 years and the house is now worth 80k less than we paid and we have no equity in the property.

Now where this gets dodgy is barret homes legal stuff say we either have to pay back the original sum borrowed or 25% of the current value, whatever is higher! So they win either way if it goes up or down.

Aibu to think this is very shady practice and I should take legal advice?

How much do you need to pay back? Have you got time to save in 18 months?

Off course it goes in their favour. That is good business sense. They are not going to lend you, say 40 grand and then be happy to get paid 10 grand back.

Yes I did sign it, but tbh I had no idea it was scewed so much in their favour.

Lawyer bangs head against wall.

READ THE T&Cs PEOPLE. Particularly before making a commitment such as buying the property.

Can you downsize OP? Or go back to renting? That is a lot of money to find in 18 months.

So they either get back what they lent - they can hardly make a loss on an asset you chose to buy - or they get some interest like a mortgagee would.

Horrible situation for you now obviously, it's unfortunate you didn't notice during the ten years that your house value was falling.

I would speak to the CAB at this point about your options - potentially some kind of debt management scheme.

I'm sorry. Investments that rely on house price rises are very risky (I realise this was meant to be your home not an investment).

Who are the several people who reassured you that the house would definitely rise in value? If you have that assurance in writing from Barrat staff, you might have a case for financial product mis-selling: because no one can guarantee what property prices will do. They never should have said that.

You think Barretts , who lent you the money in good faith, should suffer because of a fall in the market?

Dear me.

You need to repay the money in 18 months so I'd start thinking hard rather than pinning blame, if I were you.

There's no guarantee that a house will go up in value and you were at best naive and at worst stupid to believe this.
You need to look at how to repay the debt asap. Assume you have 2 years to sort something out.

You say you have no equity but has it really "lost" 25% over the past 8 years. Could you look at remortgaging with Halifax et al in 18months time to release the money you will owe. Presumably it will be based on the valuation at that point.

Well I can understand paying back the 25% fine, but the clause that if it increases in value I have to pay that back seems very unfair as there is no reverse clause for if it falls in value.

No way could we get a loan for it, I know I should of thought about it sooner but we barely can pay just the mortgage let alone saving to pay back the 25%.

I've taken on a second job and dh is doing overtime, but at best when the time comes we will only have 30% of the money needed to pay them back and thats if we continue working like crazy for 18months and a few weeks into my second job I'm already finding it very difficult.

It's a pity you bought at the end of the housing boom, but Lehmans happened in 2008, house prices tanked over the following 12 months, so by 2009 the press was full of house price falls - did you not think at that point you should start saving to pay back the 25% or did you just hope that house prices would bounce back before 2017? This isn't something that's just happened right now...

It's good you are facing it now with a couple of years to go before you're due to pay back the 25%, get an appointment with your bank and see if there's anything they can do to help you repay the 25% you owe.

You borrow money, you have to pay it back, even if the thing it is secured on goes down in value. It's shit you were one of hte last ones to not think that house prices could fall, but to be fair, in 2006-7 there was a lot of stuff in the press about house prices being over heated and due a fall.

Sorry but it's not barrats fault you stuck your head in the sand for 8 years. When I was advised my standard life endowment wouldn't pay off my mortgage and was looking at a shortfall of £15000 it was my responsibility to find that money just as this is yours.

This is something you should take legal not internet advice on. If they made oral representations to you that contradict the written contract you may have a case. If you just didn't read the contract unfortunately you probably don't. Talk to a solicitor if you're serious.

Unfortunately, this is not unreasonable. No risk on their part, fair enough. What they did in your favour however was lend you 25% of the value. If you had gone to a bank and got this money, you would have paid interest on it. If you had gone to shank and borrowed the money and your house falls in value, you still have to pay back the bank with interest.

So whilst I sympathise, there is absolutely nothing, nothing whatsoever, unfair about this situation.

It wasn't skewed in their favour- they effectively lent you the additional 25% which enabled you to buy the house.

If you'd borrowed the full amount from the bank (which you weren't able to) you'd be in the same situation ie, you'd owe them the extra 25% instead of Barratts.

In 2007 people did assume house prices would continue to rise but they didn't - you must have known for most of the time since you bought the house that you were in huge negative equity so why haven't you looked into it until now.

Negative equity sucks but you can't take legal action against Barratts for something which was very clear from the start.

Shank should read bank

I agree that having had your head in the sand about it, forget wasting energy on trying to 'prove' that Barratts have done something wrong, and focus on how to resolve it.

You need to take a responsible approach from this point. MSE might well have tips for you in terms of contacting Baratts and saving money, but don't dream of some PPI-style 'payout.'

Try YNAB (You Need A Budget) for keeping a close eye on your money - I've found it really helpful.

I wouldn't bother with legal advise.

You will pay for it.

It will come to nothing.

Why should the lose out if the house falls in value - you had 25% for free for ten years. It is a loan, not a charity. I think you should contact them Asp and explain the situation and see what you can work out with them.
I wouldn't approach it from the point of view of them being unfair, rather that you misunderstood the terms and conditons.

Sorry you're getting such a hard time on this thread OP.

Yes big business look after themselves.

My DM is in a shared equity but thankfully she never has to pay the 25%.

I think lots of people are going to come off badly as these schemes expire. I suppose it's like the endowment scandal all over again.

What I'd recommend is contacting your mp to raise the issue.

So many people in 2006-8 bought houses being told their value would rise & rise only to find now they are stuck.

I got a int only mort in 2006. I'm now stuck with a property I can't sell. It expires in 16 years and I haven't even started making capital repayments.

There are millions in the same boat.

What a crappy situation to be in!

It doesn't sound too dissimilar to the miss selling of Endowment mortgages a number of years ago by various financial institutions. The courts agreed that people had effectively been conned by various large financial institutions into taking out investment policies on the premise they would produce enough money to pay off the mortgage plus a little extra cash when they matured.

Definitely look into it further and check with a good consumer specialist.

House buying is a gamble I'm afraid. On our first house we made 20k in 2 years. We've been in our current house for 8 years and it's only worth about 10k more despite our extension we built. No company is going to just give away money for no return. If your home goes up in value then Barratt and you both benefit. The fact it hasn't gone up means you only have to pay the original amount back - is that without interest?

Fast forward 8 years and the house is now worth 80k less than we paid and we have no equity in the property.
But this hasn't happened overnight. With a large debt due to be paid off, you looked at the value of the house year by year and planned what to do as an alternative.
Didn't you?

Were you not tracking the value of the house over the years? You must have realised I while ago that this was going to be the situation, if you read the T&C's properly before you signed? There has been so much coverage of house prices in the press over the past 8 years, you must have known the value had fallen?

How much of your house value will you have paid off? Surely you must have paid around half the value of the house off in ten years?

If it's not possible to pay off then you probably need to sell unfortunately. But renting will be more expensive.