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?

morethanpotatoprints
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.

A pretty harsh lesson if OP loses her home. Not really the same thing as a policy paying out less than expected (unless of course it was a mortgage endowment).

So where do you stand with the rest of the mortgage? How much equity do you have? and is it an interest only mortgage?

icimoi I think the LTV was somewhat academic and probably wasn't stated. They were lending 75% of what those houses were being sold for, and were therefore comfortable that they could recover their loan if they had to repossess.

Sorry, I am committing the sin of not reading the full thread but, OP if you feel that this loan was missold to you, in that you didn't understand the T&C's or you we actually repeatedly reassured that the loan could be paid by extending the mortgage then you can complain to the financial ombudsman.

You can't complain because Barratt's are greedy fuckers though.

Surely the Halifax would have done a valuation on the house anyway when they were offering the mortgage...

100% mortgages were common in 2007. The everything changed after the crash in oct 2008.

Even 125% mortgages were possible.

Maybe the op isn't coming back backside the light has switched on in her head.
I feel for the op but she sounds so naive.

Because. Not backside

I feel for the op but she sounds so naive

I imagine most of us feel for her, but unfortunately naivety isn't a get-out which lenders would ever accept - otherwise everyone would do it

It' a horrible lesson to learn under these circumstances, but while talk of MPs and ombudsmen is all very well, at the end of the day we're all responsible for our own choices, even when the outcome isn't what we'd have preferred

I can understand how the OPs situation can happen. Firstly being young when buying; easy to forget what house buying was like now but it was MAD. We had a £500k mortgage and to get that all you had to do was self cert. we put down a 12% deposit and people thought we were mad even doing that. No one else we knew had put down anything (incidentally all benefitted massively from the 100% mortgage phenomenon but this is in London)

Also dont forget many peoples lives changed and never recovered after the credit crunch. Redundancies, whole industries disappearing- repayments who were manageable were suddenly impossible

New builds generally are a bit more expensive than an equivalent older house - partly to do with the sheer niceness of having a loo that has only been used by you and partly because you get to choose things like tile colours so don't have to go to the expense of ripping the (green - very very green) bathroom out once you have moved in.

Also it is unlikely that the roof will fall in 6 months after you move in and if it does then you have an NHBC guarantee to cover it.

amicissimma yes that's it exactly, nail on the head so to speak: there's no getting out of saving for a deposit of you want to buy a house, whether beforehand or retrospectively. It sounds as if the OP is now having to do exactly that, with just 18 months to spare. I would advise saving in cash rather than overpaying the mortgage to gain equity, since more equity means more chance of the second charge being called in.

I wish that we could stop people referring to "releasing equity". Equity can only be released by selling. Increasing borrowing against the notion of increased value should be called just that.

The capital balance of the average 25 year repayment mortgage only goes down 30% in the first 10 years. Even if the house price hadn't fallen, nearly all of the equity gained by repaying for a decade would have been wiped out by borrowing back the 25% loan at that point. And then you'd have almost as big a debt as you started off with, and may be considered too old at that point to get another 25 year mortgage.

I don't understand how the OP can only just have come to realise that such privations as not having sky or not having new phones every time an expensive contract are necessary when you owe not only your mortgage but another 25% on top!

Hmm, everyone blames you OP, I am sure you feel like a right idiot for signing up for the deal like that, but... I won't give up on legal angle just yet. So to summarise, you agreed to borrow 25% of the property value, which then was amount x. You agreed to repay 25% of the property value but it's a minimum of x. This means that you sold Barrats an option on your property, a call option to be precise. The premium for this call option is the interest that you did not have to pay. Now, I am not a lawyer, but financial derivatives are highly regulated instrumentsand nobody would be able to sell you a financial package with embedded options without making sure you understand and accept the risk involved. I personally think there is a legal route you would be wise to explore.

Surely all this 'Barrett bashing' is a moot point anyway as even if they were willing to take a 25% cut if current value (which is what you seem to have a problem with... Then 'unfairness' of their win win situation)... You haven no money to pay even that back with!

To be frank, if you had 25% of the current house value to give the, you'd be in a fab bargaining position. But you haven't. So why the vitriol towards them?

So sure, get legal advice. But you'll be needing to pay back a hefty sum no matter if it's sale or current value so get saving in the meantime.

You write a lot of sense, MsRinky

I'm reminded of a friend's son who lives totally rent free in family property so he can save a house deposit - only he spends all he earns on cars instead. I realise the situation is different to OP's, but when everything goes wrong for this lad, that will probably be someone else's fault too ...

And either this is a financial contract and has to be appropriately regulated by fsa (if this is still the case, I am out of the markets form almost 10 years) or it is a commercial contract and the law says fair terms must apply. But there is a time limit and you should be mindful. Again, I am not a lawyer

bemy It is almost certainly not an embedded derivative contract regulated by the FSA

She'd have been even wiser to explore it before signing the contract, bemy, not 8 years later.
Would you stop trying to give the op false hope that she has some kind of legal get out of a perfectly transparent contract she willingly entered into?

Are you a lawyer flog?

"bemy It is almost certainly not an embedded derivative contract regulated by the FSA"

Completely agree, this is why these incentives are set up like his by home builders, because they can't offer you a standard loan + interest because they are not regulated to act as a lender. It's a deferred payment for the house which presumably the Halifax accepted in lieu of a cash deposit

I'm not, no