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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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Original poster

to not have understood this about my offset mortgage?

63 replies

onesteptwostep · 26/04/2015 12:50

Well over a decade ago I took out a 25year offset mortgage with my ExP. This was when offsets were a new product and there were only a couple of lenders offering them. It was all done online/ by phone, seemed v new and innovative etc.

We then needed to increase our borrowing to pay for works to the house. With the offset we could use our 'reserve', and basically borrow more money (I think up to about 30k more, though as you pay more off the sum increased).

Anyway basically as the mortgage amount went down, our linked current account went into debt (because of the increased borrowing). My Exp then ran up further huge debts on the account, which led to us splitting up. It ended up we owed about 80k on the mortgage, and were overdrawn about the same amount.

When we split, I was told to freeze the current account to stop him spending from it. I had to open a new account for my wages etc, and then had a standing order to pay the mortgage.

I work hard and am lucky to earn a good salary. By last year, I'd got the mortgage down to a few £100. So I contacted the provider, and said was it ok basically not to pay it (I remembered someone telling me it was better to have a small mortgage balance) and put the same amount into the linked current account, to reduce that? Yes, that was fine, as I owed less than 1 months repayment they wouldn't worry about it, as could see money still going in etc. So I've carried on, and now I owe about £65k only. So far, so good.

Years ago, as well as the mortgage and the current account, my Exp and I also used to have saving accounts linked to our mortgage...these and the current account are meant to reduce interest etc. I'd forgotten about this, but as I have some other savings with a different bank,thought I might find out if I could move it and link to my mortgage. So I gave them a call.

The call didn't quite go as expected. Firstly no one understood about these saving pots (they suggested I go to my branch. Problem is I've never had a designated branch and on the phone they therefore couldn't tell me which one to go to) but worse still I was told I was classed as a bad debtor, and I have 18 months to repay everything I owe

This is because of overpaying the mortgage. I remember exp and I getting yearly letters saying effectively well done, if you carry on you will pay your mortgage off in another X years...etc.

Apparently every time we overpaid we were compulsorily reducing our term. I don't think this was ever made clear. Maybe I'm thick?

But I also don't get why I've never had any letters re the term for at least the last 5 years (the last letter they sent me on their system was in 2009!) or why when I called last year it wasn't mentioned?

Their attitude was well you know now, you should have known already, hard luck. Oh and make sure you pay up your £65k!

So is it all my fault for being stupid?

OP posts:

BagsyThisName · 26/04/2015 12:57

That sounds very complicated. If i was you I would arrange an appointment with a mortgage advisor at your local branch, requesting that they understand your particular product beforehand. Then hopefully that advisor can confirm what has gone wrong here, and if you have misunderstood or the 'computer' has misunderstood. From there it may be that you need to make a formal complaint, given the poor advice they have given you before and the lack of communication on their side.

Tutteredboast · 26/04/2015 13:00

No idea, but the first thing I'd do would be to collect together every bit of correspondence. If they haven't actually told you, can they do that. Also, I used to overpay and it didn't reduce my term, but maybe different mortgages have different rules.

Tutteredboast · 26/04/2015 13:00

Also contact the FSA

Pico2 · 26/04/2015 13:01

I don't follow this. Do you owe £65k or a few £100?

Original poster

onesteptwostep · 26/04/2015 13:04

They don't seem to have people who understand the product (without outing myself totally,it was a Woolwich mortgage which is now administered by Barclays). When I phoned I was transferred between 4 different people and the call took over an hour.

They weren't really willing to discuss my concerns though and said as I didn't understand it I should go to an independent financial advisor, as they couldn't help!

OP posts:

Original poster

onesteptwostep · 26/04/2015 13:05

I owe about £300 on the mortgage, and £65k on the current account. So £65k and a bit in total.

OP posts:

twojobsjane · 26/04/2015 13:17

Don't think the FSA exists anymore, its the FCA and they are completely different

Theas18 · 26/04/2015 13:21

We almost did this. Set up the pots in woolwich etc but thrn it became Barclays and they didn't have a scooby at all, even about savings pots so we ran away.

I think you need advice that understands this and im not sure where you get it. Sorry.

VacantExpression · 26/04/2015 13:22

Nearest branch, or failing that a n independent adviser. Take all correspondence, I'm sure they are obliged to send yearly statements too so not to have heard from them for 6 years is appalling.

Saltedcaramellavacake · 26/04/2015 13:27

I have one of these mortgages. There's no point putting more into the "savings pot" of you only owe 100ish on the mortgage. The savings pot reduces the interest you pay on your mortgage, and you hardly owe anything on that. Your "problem" is that you're a "bad debtor" because your current account in 65K in debt, isn't it? Shouldn't you pay that off if you have savings?

Original poster

onesteptwostep · 26/04/2015 13:29

Sorry, I should make it clear, I've had statements. What I haven't had is any letters about the overpayment for years, or any other letters saying how little of the term was left. If I'd not called this week I would never have known, presumably for another 2 years til they demanded the full amount.

I think at least part of the problem is the switch to Barclays. The first 2 people I spoke to didn't even know what an offset mortgage was,and none of them had heard of the savings pots.

OP posts:

TheCrowFromBelow · 26/04/2015 13:30

I don't think they can advise you, by law they are not allowed to recommend any course of action to you. They can only tell you what the product is and you have to decide. If you need advice you need an IFA.

Saying that, they should be able to explain the product clearly so you understand exactly what needs to be paid, and I think you should have had an annual statement in writing or by email. Could letters have been going exP? Yy to going into the branch but I also think you should speak to reputable IFA.

museumum · 26/04/2015 13:35

I'd speak to an ifa and see if you can get rid of these products by remortgaging to the amount you owe on the current account.

It was my understanding that overpaying the mortgage was only "good" if your current account was in credit.
I can't understand why anybody would overpay on the mortgage while in debt on the current account and I can see why current Barclays staff would struggle to understand too.

Original poster

onesteptwostep · 26/04/2015 13:35

The money owed on the current account is 'allowed' because it's part of the reserve. So even now I could (if it wasn't frozen) add another £60k debt on to the current account because my total reserve is £125k, of which £65k is being used.

I don't have £65k of savings, nowhere near. I'd not put what I do have into the current account because that account is frozen - if I put money in I can't get it out. If it's in a pot I could still access it if I have an emergency (car breaks down, maintenance to house etc) and need the money out.

OP posts:

TheCrowFromBelow · 26/04/2015 13:36

Ah x post.

& yes salted is right, they want the debt on the Current Account paid off.

I don't understand why you'd overpay your mortgage when your current account is so far in debt? Is that debt shared with exP?

Original poster

onesteptwostep · 26/04/2015 13:39

With hindsight I could have put the minimum into the mortgage, and the overpayment into the current account. No one suggested that. It would have been nice if it had been explained when the current account was frozen.

However even if I'd done that I'd still owe about the same, except split between mortgage and current. And from what I was told because I'd overpaid previously the term would still have reduced by same amount. So I'm not sure, based on what I've been told, id have been any better off.

OP posts:

Yepcomfortable · 26/04/2015 13:41

This reply has been deleted

Message withdrawn at poster's request.

hackmum · 26/04/2015 13:43

I'm a bit baffled by this, so can't really help. We used to have an offset mortgage - isn't the whole point that your current account is set against your mortgage? So that any money you pay into the current account goes to pay off the mortgage, and if you go into debt on your current account that is added to your mortgage? So in fact the £65k you owe on your account is, in effect, a mortgage of £65K? I mean, how many banks would let people go into debt of £65k on their current account?

I think you're probably better off asking a financial adviser than asking Mumsnet.

TheCrowFromBelow · 26/04/2015 13:46

I don't fully understand this "reserve" as surely the point about the linked accounts was that you were rewarded for being credit, however the point is that they want their money back and the debt paid off within in 18 months.
That's a sum of £3.6k per month. Can you use savings and wages to do that? If not then I think you need to consider remortgaging and clearing that £65k in one go as there must be some sort of interest being charged on it?

YY to IFA!

foxinsocks · 26/04/2015 13:48

I had the same product with Woolwich that got transferred to Barclays and once it was with Barclays they were clueless.

I am not sure your reducing term analogy is correct. I'm an accountant so have an ok understanding of these things. The way it worked was that because you were overpaying, your mortgage term, by nature of the overpayments, reduced. I.e you made your term shorter by overpaying.

Now I never took the reserve out on the current account but what I am wondering is whether they then applied the new term to that debt too which may be why you are where you are.

If the rate is good, can they not just 'transfer' your reserve overdraft to the mortgage? If not, then I would visit an IFA to help you sort out your credit rating and then remortgage.

I also wonder if your bad rating isn't something to do with ex p and debts he may have run up against the property. Please make sure you are financially separated from him too!

Original poster

onesteptwostep · 26/04/2015 13:49

As said, at one point we owed over £80k just on the current account. In fact I can't remember when the current account was last in credit, probably around 2003, because we then went into the reserve to pay for building works. So far as exP and I understood, it was all repayable within a max of 25 years. The time now apparently has reduced to 16 years. It's not so much that it's reduced, more that no one told me. If I continue paying it off as I am, it will be paid off in 3-4 years anyway, but obviously that I now know isn't quick enough.

The problem with remortgaging is Exp is still on the mortgage and completely non co operative. Barclays said I wouldn't be able to get a new mortgage without his consent. I will be checking this, and everything else, with a IFA.

OP posts:

CatHackney · 26/04/2015 13:52

I'm wondering if maybe the fact that this is an offset mortgage is a red herring?

I know that with a standard mortgage with HSBC, if we were to make an overpayment by just transferring money into the mortgage account, they would shorten the term of the mortgage and keep our monthly payments the same. If, instead, we wanted to make an overpayment but keep the term the same, then we have to call them up on the phone to do this. On one occasion, we did this but HSBC messed up and shortened the term of the mortgage. We were able to get this fixed and the term of our mortgage put back to what it was originally, but we realized the mistake within a year and we're only talking about a small amount of money and a small amount of time on the mortgage.

To me, it seems like all your overpayments on the mortgage have led the bank to shorten your mortgage term in proportion to your overpayments, but you did not realize this and they failed to send you statements making this clear. Perhaps if you call and speak to someone at the mortgage company and put it in these terms - taking the focus away from the offset aspect - you would get more sense out of them? Explain that you absolutely never intended for them to shorten the term of your mortgage, that you did not know that this is what they were doing, and that you could not have known, because they failed to provide you with statements stating the end date of your mortgage. Then request that they put your mortgage end date back to what it was originally. See what happens. It worked for me.

Good luck!

IrenetheQuaint · 26/04/2015 13:55

The staff you spoke to clearly don't have a clue, but I'd be surprised if you couldn't sort this out via a conversation with someone senior at the bank. You're clearly financially responsible and a good earner and I can't see why they'd want to put you into default.

As well as speaking to an IFA, ring them up and pressure them until they put them through to someone who knows what you're talking about. Get everything in writing. If no success, complain to the financial ombudsman.

Original poster

onesteptwostep · 26/04/2015 13:55

I don't even earn £3.6k a month so even if I paid all my earnings i couldn't do it. Savings aren't enough either.

I'm not expecting people on here to know all the answers. Barclays basically said I was stupid for not understanding it, or not having realised I had to pay it all back at an entirely arbitrary date I'd never been informed of. I didn't understand this, or how I could know the date.

The fact lots of other posters are saying its confusing is making me feel less thick, thank you

I do also agree I need to speak to a IFA so thanks to those who have confirmed that.

OP posts:

Buxhoeveden · 26/04/2015 13:58

As PP said, it sounds doolally to overpay a mortgage before clearing a £65k overdraft.

Perhaps you should have realised that, BUT, as they are linked products, arguably so should Woolwich/Barclays. I'm surprised it wasn't flagged up.

Have you specifically asked them if they will offer you a remortgage to clear the overdraft?

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