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?

Usual practice to be to take an indemnity policy to cover the 25% - I'm surprised they didn't discuss this with you :( I have friends with Barrat homes houses and that is what they did

You're in a similar position to the people who took out the northern rock 125% mortgages really. The most productive thing you can do is probably begin negotiations with Barrett over how they will accept payment and whether they will accept a reduced amount. Presumably it's effectively a secured loan, so they could force a sale but there is no point as there's negative equity. So they will probably negotiate.

Realistically, you need to consider whether you can afford to remain in the house. You're struggling with repayments on 75% of the house in a time of super low interest rates, with a house that can't beremortgaged due to negative equity, with a large loan which you are likely to need to repay at least some of.

The help to buy equity loan from the government is actually the equity amount, so if it goes down in value you pay less back. And it's over 25 years so you're much more likely to be able to remortgage or save.

Are the properties sold at market price originally? And not inflated value, I hope so.

Definitely talk to Barratt, they want you to pay them back and may help you to find a way.

And yes do check out regarding the advice they gave you when at raging their loan to you - surely this would come under the financial ombudsman - perhaps it is worth approaching them - the advice that barratts gave to you when selling the product might be key here.

In the meantime you need to sit down - do an income expenditure, get together all debts and their details such as interest rates, repayments. See what you can potentially save up Etc and then consider the cost of different scenarios :

A - sell house
B- remortgage to 90%ltv (consider future impact of higher mortgage interest though compared to lower 75% ltv and obviously this will not cover the full 25%
C - borrow from family
C- borrow from elsewhere

Anyone with a modicum of sense knows property is not a sure bet. No investments are. OP, you've made a big mistake and now have 18 no doubt shitty months to rectify it. Forget your MP, contact barrats and beg for an extension to the repayment schedule. I can see no way out of this, the T&Cs will be watertight.

Op is not getting a hard time, she is getting practical advice. Speak to Barrett or loan company now. Consoling the op brings nothing, mistakes were made and action needs to be taken now.

I feel the O.P. has been given a really rough shaking on this thread. She's in a horrifying position and all the 'well it's your fault/how could you be so naïve/why didn't you/should have dones' are hardly consolatory

I think what people are objecting to is the 'blame someone else' mentality of the OP.

Just the title sums it up really- it doesn't sound like there's even a legal case to make so whether it's BU on NBU is irrelevant.

It's a horrible situation but there's lots of good advice on here but it seems the OP has disappeared because she hasn't been told it'll all be fine as it's entirely Barratts fault and she's entirely blameless.

God yes those 100%+ mortgage deals - I know someone who had one - combined with buying one of the first houses on a new estate which was overpriced - as house prices on the estate dropped to more realistic levels, she realised her mortgage was for 30-40% more than the value of her home. "Luckily" time was on her side and she benefitted from the 2002 boom (as in broke even) but spent a good few years feeling trapped (and stupid).

The thing is, as a layperson, you do tend to trust the "experts" and their fancy trend graphs etc. Obviously there were signs a few years back that OP may be in this position, but I do have a lot of sympathy.

Virtually everybody has traded in this idea of property being a fail-safe investment and all we hear in the media is how property prices are rocketing especially in London. Virtually everyone I know thinks buying a property is now some sort of golden ticket to future wealth and that their house price will just keep rising.

I find this difficult to believe, to be honest. Within recent memory we have had two periods when property prices crashed - first in the late 80s/early 90s, and then from around 2008 onwards. Surely anyone who believed, even after the first crash, that it couldn't happen again would have to be utterly naive?

How could it possibly be "shady practice"? You owe what you borrowed, the risk is all yours, same as any other mortgage.
Surely to God you read the small print???

Actually, is your house covered by a government mortgage guarantee scheme? Because if it is, the government will pay Barratt the money if you can't, so it may be in their interests to force you to sell. You need to take proper financial advice.

So sorry to hear this OP. It is hard. You must be feeling sick.

I don't think that you have a case against Barratt though - they lent you money - they want it back. PPs have some good advice. Maddening above suggests some options.

One of the problems with selling is that costs involved make this an expensive process - and you have to live somewhere. Depending on your income my suggestion would be to borrow and if possible rent a room or your driveway or your garage to generate some income from the asset.

I get angry when I hear people talk about getting on the property ladder as if it is some sort of gravy train and going on about how lucky those who own a house are - as if we have somehow won the lottery - with no understanding of the risks and costs and sacrifices involved.

I bought in 1991. My flat lost almost half of its value within two years. Interest rates went up dramatically. I was crippled with debt. I applied for a job abroad, lived in one room on site and rented my flat out. It took years to recover the loss.

I sympathise - and wish you well.

I don't think you can blame Barret's for all the problem I think maybe you where taken up with the excitement of eventually getting a home of your own away from renting and took your eye off the financial implications.
Other neighbours will be having the same problem and I can guess that they where funded via the Halifax or similar for their mortgage's as Barrets use a couple of designated Building Society's for these kind of schemes and the value of the properties are already agreed between the BS & Barrets,because Mr Builder wants X amount back from that new development and surveyors & financial advisors are aware of this,I wouldn't be surprised if a couple of BSs gave valuations on that site as just one BS would not like to fund the whole site in case of future fall in values,such as what has happened here.When I worked for the Company new sales where directed via in house financial advisors which I am sure maybe happened with the OP,they like you to be signed up and exchanged within 2 weeks of initial reservation to keep the adrenalin going.

Barratts gave you an interest free loan. They have lost money on the deal. I don't think anyone will say that is 'shady' practice, they did you a massive favour.

Do you also think that the Halifax loan should not have to be paid back in full because the house dropped in value?

Absolutely everything you sign states quite clearly that 'investments can go down as well as up'. There is no way you could not have been aware of that.

I wouldn't rent out your driveway or garage without checking your liability insurance first. Rent a room would be okay but, again, check it out really carefully before you commit if you decide to do that.

Wow wasn't expecting to get so much response from this!

Yes I will try to engage with everyone here. I know I was niave , but ten years later did sound like a long time away and it has just crept up. Head is fully out of the sand now, and being pelted on from MN!

The sales people did convince us that it would go up in value, I now think that they overvalued the property by at least 25% so yet again barret win! Anyway they're a business I guess it's no surprise that they screw over people to make a profit.

We were younger and were used to payrises that were double figure every year, so ten years down the line we thought we would easily be able to save enough to pay back the 25%. But since then wages haven't gone up at all, and bonus have gone right down.

We do now face a while of just saving and working hard. Done a budget and have already gone down to pay as you go phones and keeping our existing old phones, got rid of sky, going to meal plan. Would love to get rid of one car, but the buses are so expensive it really isn't worth it and the roads are too dangerous to walk / cycle 10+ miles a day (semi rurual).

Isn't the mp mentioned above mortgage provider, rather than Member of Parliment??

Jane What are the numbers like? How much is outstanding on your mortgage? How much is the house worth now, and how much do you owe Barrett? And is your mortgage Intrest only or repayment?

If you had borrowed the money from the bank over 10 years, you would have been required to pay back significantly more than the money borrowed. I'd say since prices have fallen you got a good deal - paying back, say 25K in 2018 instead of borrowing 25K in 2008 will have saved you thousands of pounds.

I'd focus on ways to raise (some of) the money needed. If you let people know the figures, loads of advice will come your way. And if your prepared to share your budgeting figures and income, even more advice may be forthcoming.

So sorry for you OP, what a horrible situation to be in.

Tbh I think all this push for home ownership is madness, most people cannot afford to buy a home because if things change in house values or life circumstances you are screwed. Most people cannot cover the mortgage in that situation or deal with the loss of property prices rapidly devalue.

Get legal advice and explore every option open to you.

They most definitely did not do me a favour! They made a huge profit on me and even if I never paid back the 25% they would be quids in! Overvalued the property encouraged me to take on a lot of debt and no matter what they win out of it. Yes it maybe businesses, but it isn't ethical.

Yes the go down as well up is clearly stated lots of people bought into schemes like this to buy house you were not trapped or enticed into anything Barrats did not lie to you

Of course it isnt ethical they have no duty to be ethical they offered a .loan so peoplewould buy their houses this isnt their responsibility its yours you have to pay back the loan they gave you it isnt their fault your house is worth less or whatever they a loan is a loan its a risk you took

Could it be a case of miss selling' ?

10 years ago who would have thought that PPI was a massive miss selling scandal? Presumably everyone read the small print who took it out.

There are some very mean people on MN.

People are not being mean just realistic and posters have been sympathetic to the op but truthful she cant blame a housing company for selling her a dream.

Nothing unethical about it - you took on the debt because you wanted to buy a house. Home ownership is not compulsory.
However, good to hear you are now addressing the issue and good luck with discussing the issue with barratts.