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AIBU?

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Original poster

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

268 replies

twojobsjane · 25/04/2015 09:27

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?

OP posts:
ShanghaiDiva · 25/04/2015 09:52

I don't agree the op is getting a hard time - she was naive and needs to address the problem now.

This is not a case of big businesses looking after themselves - she had 25% of the value interest free and now they want the money- not an unreasonable request.
She has received some sensible advice here, but suggesting the company has acted immorally is not helpful and is not true.

m0therofdragons · 25/04/2015 09:52

Look at it this way. If your parents lent you 10k then you'd pay them 10k back so why would you pay Barratt less? Sounds like a very good scheme as there's no interest added. With your mortgage you'll be paying off a lot more than you originally borrowed in interest.

Enjoyingmycoffee1981 · 25/04/2015 09:52

Oh please don't go to your mp.

It will be a complete an utter waste of your time. This is NOT unfair and an MP will be utterly interested in this. And rightfully so.

I do feel for you though, but please try to avoid the blame mentality.

Enjoyingmycoffee1981 · 25/04/2015 09:53

Mp will be utterly uninterested... I meant to say

Quitelikely · 25/04/2015 09:53

I sympathise with you. How your house has dropped in value by 80k is unbelievable. Are you certain about this valuation?

I do think things have to be fair. Look at Wonga for instance. The government has stepped in and they now have to offer a fairer service.

You should go to the FSA for advice.

Unfortunately it looks like you are going to have to put your house on the market asap otherwise you are going to get repossessed.

Have you tried to contact shelter? Or debt line they may be able to point you in the right direction.

Maybe it's best to seek alternative accommodation now and then hand the keys back to your bank.

NeedABumChange · 25/04/2015 09:54

Of course they have to win either way, that's their reward for loaning you loads of money for the past 10years!

ShanghaiDiva · 25/04/2015 09:55

Agree with coffee1981 contact Barrett, not your mp and do it now.

BearPear · 25/04/2015 09:55

We took an endowment mortgage in the late '80s as the adviser said the market never goes down - here we are now 25 years later covering a £16k shortfall. In his defence the adviser did say the market "could" go down but in his experience that never happens and we could easily expect to clear the mortgage and pocket £30k! How naive were we?!

LIZS · 25/04/2015 09:55

I guess the difficulty is whether the Halifax mortgage is interest only or capital repayment. They presumably have first charge on the property so even if you were to sell there may be little or none to repay Barretts after the mortgage is dealt with. So the debt is still outstanding. I doubt you would be alone in this situation though so you could approach them now to discuss options and try to plan ahead.

FirstWeTakeManhattan · 25/04/2015 09:56

The OP is not getting a hard time. She is getting (hopefully) useful and practical advice and encouragement to improve her current situation.

It's pretty much 100% YABU, but no-one is attacking the OP. I think MN can be at best in this kind of situation, with people pooling ideas, experiences and directions for the OP to consider.

KarmaNoMore · 25/04/2015 09:57

This reply has been deleted

Message withdrawn at poster's request.

m0therofdragons · 25/04/2015 09:58

Just realised, if your house had gone up you'd owe more so surely it's a good thing it's gone down as you only need to pay the minimum. In a couple of years your house could be worth more and you'll not have had to pass that onto Barratt.

DownWithThisTypeOfThing · 25/04/2015 09:58

Even selling up wouldn't help as if the house value is currently £80k less than OP paid, she can't clear mortgage or Barrett loan anyway.

LIZS · 25/04/2015 09:58

We too suffered losses in the crash of the early 90s and endowments underachieving. It is the nature of the property market and economy I'm afraid.

Bearbehind · 25/04/2015 09:58

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

Really Hmm

It's not an MP's job to bail everyone out from bad financial decisions.

The OP has known for a long time that her house had massively dropped in value but done nothing about it.

The only option now is to look at ways to find the shortfall and that doesn't include trying to apportion blame for what's happened.

NerrSnerr · 25/04/2015 10:00

I agree that Barretts are the people you need to contact, not your mp. I don't think they're being unfair, you took a risk that didn't pay off.

BlueThursday · 25/04/2015 10:01

Woah woah woah repossession is hardly on the cards and DONT hand the keys back what crazy advice!

If you feel at the end of the agreement there will be a shortfall contact Barratt now to ask their advice. I doubt you'd be the first or last in this situation.

As your mortgage provider is likely to have first charge or your property and Barratt second it wouldn't be in anyone's interest for Barratt to do anything if as you say there's no equity. The first charge holder would be paid first so if there's no equity then it's a pointless exercise for Barratt.

They might be willing to extend and the sooner they hear from you with a plan the more likely the are to accept it

Best of luck

LIZS · 25/04/2015 10:01

Down, it would depend if the capital owed on the mortgage has been reduced over the past 8 years. Although unlikely to be as much as 80k.

ragged · 25/04/2015 10:01

Are you neighbours in same situation, 2JJ?

Would you try the media (Guardian or BBC money help pages). They would certainly like the human story side of your situation.

Fairenuff · 25/04/2015 10:03

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.

But the house didn't increase in value so that part is irrelevant. What you are left with is, you borrowed 25% with the agreement that you paid it back in 10 years time. Nothing wrong with that at all.

Are they not even charging interest? If you got an interest free load, you are very lucky.

Theycallmemellowjello · 25/04/2015 10:04

I really think this is one of those situations where Internet advice is not useful. Op, you have no idea of the qualifications of people posting here and without knowing the full details of your situation it is impossible for anyone to know if you have a case. Prima facie the contract is binding, but it is possible that you were given misleading advice which undermined the contract, and this may give rise to a cause of action. You need legal advice.

Stickerrocks · 25/04/2015 10:04

I agree with LIZS. If you have an interest only mortgage on the remainder of the property, you have an even bigger issue on your hands. How are you clearing the mortgage capital?

Is there any scope to get a different interest deal on the mortgage for a couple of years to enable you to put the interest saved towards your Barratt loan? How much did you initially borrow & how much do you owe on each part of the debt - mortgage & loan?

Viviennemary · 25/04/2015 10:05

Yes I think it's cheeky when you think about it. It's one of these things consumer programmes take up on and then people become aware. But you did sign. Was it explained clearly at the time what would happen if the price went down and you still had to pay back the full 25%. So that part is dodgy IMHO. Get legal advice. So how can it be shared ownership if they aren't losing out when the price goes down. There is such a thing as an unfair contract.

RubbishRobotFromTheDawnOfTime · 25/04/2015 10:05

"Surely you must have paid around half the value of the house off in ten years?"

Hardly! Maybe if they had a 15 year mortgage but it doesn't sound like they were in a position to do that.

OP effectively bought 75% of her house from Barratt and agreed to buy the remaining 25% after ten years. At that point the 25% was calculated from the current value of the house, not the original sale value. That seems fair given that it's at the ten year point she's buying the remaining portion. Barratt are taking the risk that their investment won't have increased but are limiting that risk by saying the amount repaid can be no lower than the original sale price. Are they not charging any interest on that? In which case they have actually lost out due to the reducing value of money over time.

I might be questioning whether the original price was inflated but presumably the mortgage lender was happy with it.

OP you should never have relied solely on a house price increase to buy the remaining 25%. That was always unrealistic over ten years even if you hadn't bought at the peak of the bubble.

PurpleSwift · 25/04/2015 10:07

So have you saved nothing over the last 8 years to repay this debt?! If so OP you've been very naive and really stuck your head in the sand. I think you need a financial adviser