Was I mis-sold loan?

By THIS IS MONEY
Updated:

 

SOME years ago I took out a Shared Appreciation Mortgage with the Bank of Scotland, with the intention of running it for a few years then moving to a conventional mortgage.

My house was valued (in late 1997) at £170,000 and I borrowed £115,000 - about 67% of the price. Now my house has been valued at £270,000. This means that to stay there I need to find £115,000 plus £67,000: that is a new mortgage of £182,000!

When I took out the SAM, I thought the 67% of appreciation to be paid back was only valid over the 20 years that I had nominally agreed to run the mortgage for, and that earlier redemption meant paying pro-rata.

I only found out last week is that the SAM was not taken out with BoS but with a private consortium who only used the BoS as a vehicle. The BoS say both these aspects should have been explained to me when I took out the mortgage (they weren't), and I should take any grievance up with whoever sold me the mortgage.

When I rang BoS they put me in touch with their local branch for the paperwork. I feel this has been mis-sold to me - what can I do? GW, Leamington Spa

David Hollingworth of mortgage brokers London & Country, says: There are some inconsistencies with the terms of a SAM mortgage here, which really need to be ironed out with Bank of Scotland.

Firstly, a SAM mortgage would only allow an advance of up to 25% of the property value. The share in the appreciation would then usually be on a 3 to 1 basis (ie 75%) if no interest was to be paid or possibly on a 1 to 1 basis if the interest on the loan were paid. Therefore it seems unusual to be given an initial advance of 67%.

The second point is that these deals were designed only to be repayable on death or sale of the property. There was therefore no mortgage term set on SAM deals so again it appears inconsistent that a 20-year term was set.

Despite the fact that Bank of Scotland are only administering the deal, they are still your point of contact to resolve the situation and it would be wise to arrange a meeting to go through exactly what the situation is and clarify your position.

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