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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:
Fairenuff · 25/04/2015 14:42

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!

They lent you money at 0% interest. They make no money from that. If they had put in a building society instead, they would have made money. There is no profit in lending money interest free.

What about the 75% that the Halifax lent you? They are charging you interest on that, they are making a profit on you. Why do you have a problem with Barrat and not Halifax?

Floggingmolly · 25/04/2015 14:49

Of course they didn't over value the property Hmm. The value in 2007 bears no resemblance to the value now... Why would it Confused

thewavesofthesea · 25/04/2015 14:51

Are you absolutely sure you have to pay back the value of the original value and not 25% of the current value? I am in a shared equity deal too, except the amount we have to pay back can go down if the house value goes down (this seems not uncommon according to my bank). I bought in 2009 however so there has been very little change in value, in fact the house builder had reduced the asking price of our house by 20% before we even looked at it as prices had fallen since it was built (next door paid an extortionate amount for theirs!)

Puzzledandpissedoff · 25/04/2015 14:54

They haven't overvalued the property. A house is worth precisely as much as people are prepared to pay for it

I completely agree, though it's true that these schemes have enabled expensive homes to be sold to people who can't really afford them. Trouble is, many are so pleased to be moving into their shiny new home that they ignore possible downsides and stick their heads in the sand ... later, when the implications sink in, the developers who gave them "a brilliant deal" are suddenly everything that's wrong

Just as it's not a crime to be naive, it's not a crime for a business to look after its bottom line either

LuluJakey1 · 25/04/2015 15:46

If it has fallen £80,000 in value, you must have taken on a big mortgage at the time. It does sound as if it was over-valued. Did they value it- ie whole package of valuation and mortgage through the companies they used? Sounds like you might hae been caught by that; which was quite common at the time, but not illegal or unethical.

I bought my house around that time and fortunately, it has increased by £100,000 in value. But I had equity anyway from a ridiculous profit made in 18 months on a flat which doubled in value as the housing market was booming. And we have overpaid the mortgage every month and paid off chunks as we have saved up.

I think if you buy property you have to be wise to how to reduce a mortgage asap so you don't get caught out by negative equity. Is your mortgage repayment only?

There is some luck involved in the housing market but mainly common sense I think - what you buy, where you buy it, what you pay and balancing it against what you can really afford. If you get one of these wrong it can all go tits up very easily. No guarantees of profit.

paxtecum · 25/04/2015 16:21

Mortgage companies can be guilty of miss selling.
It will be the new PPI scandal.

Op needs to take legal advice. There are companies who specialise in mortgage miss selling.

Floggingmolly · 25/04/2015 16:50

What would they have miss sold, pax? They made a valuation on the property, if op felt it was outrageously high she could and should have walked away.

I doubt she got a 75% mortgage from Halifax on an inflated valuation either; they'll have done an independant valuation as they would for any other mortgage.
If only it were possible to sue the bank because your home failed to increase in value as you'd hoped...

BoulevardOfBrokenSleep · 25/04/2015 17:01

Fairenuff it can be hard to judge the value of new-build houses, in my opinion. They always seem to be more expensive than the equivalent 'used' house, but you end up living on an ongoing construction site with no infrastructure.

Feckeggblue · 25/04/2015 17:04

I'm assuming you're on a estate OP- if so it's likely many people on the estate are also in negative equity and will have this problem. Contact barratt, they will be able to tell you what they can do. As others have said although you clearly owe the money barratt are a little limited in the action they can take to recover it so should be realistic in helping you arrange something alternative.

That said I think you have been given poor advice- even the shark banks offering 120% mortgages are their clients arrange a monthly repayment with a time limit for the loan portion.

Fairenuff · 25/04/2015 17:07

In order for it to be 25% more than it was worth, it would have to be a higher price than comparable, older, existing houses. If that were the case, OP would have bought one of the cheaper, older houses as that would have been all she could afford.

The only way she would have gone for the new build would be if it were not 25% more expensive than other houses at the time. It therefore follows that it was, in fact, not over valued.

Feckeggblue · 25/04/2015 17:09

And tbf barratt didn't lend her cash - they just reduced the amount they were willing to sell the house for at that point, with the rest to be paid later. I work a lot with barratts and am pretty sure they are not regulated to make loans which is why it has to be interest free etc

BoulevardOfBrokenSleep · 25/04/2015 17:14

Can't fault your logic there, fairenuff, it's true.
Well, I suppose unless you had no deposit at all and hence couldn't get a mortgage for anything that was cheaper without the wacky loan-that's-not-a-loan scheme.
Slightly surprised the mortgage lender didn't pick up on this, are they not supposed to spot if you are also borrowing the deposit? Maybe not in the heady days of '07.

DownWithThisTypeOfThing · 25/04/2015 17:23

BoulevardOfBrokenSleep

Can't fault your logic there, fairenuff, it's true
Well, I suppose unless you had no deposit at all and hence couldn't get a mortgage for anything that was cheaper without the wacky loan-that's-not-a-loan scheme

Which is exactly the situation the OP was in - she says in very first post she had no deposit.

Fairenuff · 25/04/2015 17:25

But if that was the case, then OP would only be buying the more expensive house because she couldn't get the deposit for the cheaper one. Which means that she knew at the time that she was paying too much for the new house.

She can't have it both ways. She either knew it was overpriced but went for it anyway so that she could have the deposit covered, or it wasn't overpriced in the first place.

Feckeggblue · 25/04/2015 17:26

But fairenuff my understanding is the OP didn't have a deposit (75% mortgage And 25% from barratt) so couldn't have bought a second hand house. The barratt scheme was the only thing which enabled them to buy at all. So she could well have paid over the odds although I doubt the Halifax would've lent against something significantly over valued

Fairenuff · 25/04/2015 17:26

x posts Feck

Feckeggblue · 25/04/2015 17:27

Yes I think OP has indicated it was overpriced

Fairenuff · 25/04/2015 17:29

She is trying to claim that it is only now, looking back, that she realises it was overpriced. I'm saying that, logically, that doesn't make sense. But OP hasn't really explained enough, we only have very sketchy details to go on.

Icimoi · 25/04/2015 17:44

I don't see how a representation that property prices would rise could be a misrepresentation in law that would override the terms of the ccntract. Any such misrepresentation has to be a representation of fact or law, and a representation about what property prices are likely to do can only be a representation of opinion.

Floggingmolly · 25/04/2015 17:48

But op bought just before the house price crash of 2008... She can't declare with any credibility at all that it was 25% over valued, it's pure speculative nonsense.
Even if it actually was over valued; she bought it because she had no other option financially, a bit like those payday loan companies charging extortionate rates of interest because they're aimed at people who can't access any other forms of lending.
It's perfectly legal, you're presumed to enter into the agreement with your eyes open.
She just didn't think the day would come when she'd be expected to pay it back, unfortunately.

listsandbudgets · 25/04/2015 18:01

OP there are at least 2 threads on MSE I think you will find relevant.

The first was actually started in 2007. Interestingly people posting here seem quite sure that the 25% repayment would only be on the market value at the time of repayment regardless of whether it went up or down. If you're correct then sadly some of them are in for a horrible shock. 2007 thread

The second was started in 2013 by someone in a similar situation to the one you find yourself in now

Bakeoffcake · 25/04/2015 18:03

OP please phone Barretts on Monday. They should want to help you.

As someone upthread said, Barretts won't want to force you to sell the house, as it is in negative equity and your Mortgage company will get their money before Barretts. So they might agree to you paying it off over a period of time rather than all one go.

Sallyingforth · 25/04/2015 18:05

If the house had a 'true' value at all it was probably the 75% that Halifax were prepared to loan.
The other 25% was Barratt's additional profit they they were prepared to wait 10 years to collect.
It's just that simple.

morethanpotatoprints · 25/04/2015 18:09

I'm sorry OP but something you said jumped out at me.

Of course they are going to be quids in, they are a business and not there to run at a loss.
You need to understand what you are signing and it seems like you didn't at the time.
A good lesson to learn, I think we all have one of these type of things in our life.
With my dsis it was a policy that ended up paying less out than she put in.
She didn't read the small print.

Icimoi · 25/04/2015 18:11

Sallyingforth, were mortgage companies offering 100% loan to value in 2007?