Some home truths

The ombudsman is seeing evidence that some people are putting misplaced faith in 'urban myths' about what lenders can and can't do and leaving it to late to get the right kind of help and support.
The ombudsman is seeing evidence that some people are putting misplaced faith in 'urban myths' about what lenders can and can't do and leaving it to late to get the right kind of help and support.

Sometimes, the truth can hurt.

But that doesn’t mean it can be ignored, avoided, or magicked away. And certainly not when it comes to your mortgage.

Yet the financial ombudsman has warned that a large number of people are putting their faith in “urban myths” about what lenders can and cannot do and, as a result, are regularly landing themselves in trouble.

“When times are hard, it’s completely understandable that people will look for solutions that might offer some relief from the pressure they’re facing,” says Martyn James, a spokesman for the ombudsman service.

“The good news is there are lots of ways you can get help if you’re struggling with your mortgage — but you need to speak up and seek help as soon as you can.

“Don’t put your faith in mortgage ‘urban myths’ that suggest you can break your contract or stop paying your premiums indefinitely.

“If it sounds too good to be true, it is.”

Here are common “mortgage urban myths” that the ombudsman has heard in the last year:

If your lender can’t produce an original mortgage contract, it’s “unenforceable”.

The ombudsman has seen this myth attach itself to numerous debt problems, including bank charges, and it crops up quite often on internet forums.

But the service warns only a court can decide if a contract is unenforceable, and pinning your hopes on a slight technical loophole letting you off paying off your mortgage is “dangerous”.

Repossessions have been going down, so lenders are more relaxed about arrears

Yes, it’s good news that repossessions are on a downward path, but these figures are not a guarantee of what will happen to you in the future.

Lenders do work hard to try to keep people in their homes and generally don’t want to repossess properties, which can be a messy and costly business for them.

But, just because repossession is a last resort, this doesn’t mean that your home isn’t at risk if you don’t keep up with your payments.

Mortgages are long-term investments and my situation will improve if I can make it through the next year or so

Mortgages are potentially the longest financial commitment most of us will make.

But a lot can happen over a couple of decades, so it makes sense to think about how your finances would cope with a sudden life-changing event, such as losing your job or a relationship breakdown.

I can always “port” my mortgage

Many people believe they can simply port or switch their mortgage to another type of deal under their existing contract.

But people often don’t realise that this is up to the lender, and is not a guarantee.

Mortgage lending rules have been toughened up. For example, interest-only mortgage deals are considered a “niche” product nowadays and people looking to buy a home or re-mortgage now face more probing questions into their spending habits than they did before.

The ombudsman has seen numerous cases involving people who thought they could move to a different deal but no longer qualified.

While many lenders may allow you an interest-free period to help you back on your feet, this isn’t a long-term agreement.

If I’m in financial difficulties, my lender is obliged to refund charges and help me out

If you tell your lender you’re in trouble, they should look at your situation and tailor a plan to help you. This may include removing some charges and debit interest.

But these solutions are not indefinite and it makes sense not to rely on their support, but to take a long, hard look at your finances yourself.

WHAT... ARE YOUR RIGHTS AS A RENTAL SECTOR TENANT IF YOUR LANDLORD IS SELLING UP?

As the property market recovery continues, many landlords may choose to cash in on their investments and renters may find themselves in the position of having to find a new home.

Susan Fitz-Gibbon, president of the Association of Rental Letting Agents (Arla), says: “If you receive notice that your landlord is selling, the most important thing to remember is that as the tenant, your tenancy agreement remains valid.”

Arla says you have the right to stay until the date stipulated in your tenancy agreement, but check for any break clauses which can enable the landlord to end the lease early - or for you to end your tenancy earlier if you want to.

The amount of notice that a landlord must give for prospective buyers coming to view the property may be set out in your tenancy agreement. If not, you should still be given reasonable notice, often 24 hours.

If a property sells, the new owner must also respect the tenancy agreement. It could be a good idea to have a new agreement drawn up, with your new landlord’s name on it.

You may be offered the chance to buy the rental property you’re living in yourself, before it goes on the market, although landlords aren’t obliged to do this.

If you have a good relationship with your landlord and are in a position to buy, it might be worth taking the plunge.