It was not the fault of an Openwork adviser that a mortgage borrower ended up paying more than he originally planned, an ombudsman has ruled.
The client – referred to as Mr C – complained after the appointed representative of Openwork mistakenly asked a lender to lend less than was needed to buy the property.
Openwork asked the lender to increase the amount it was lending to him and this was addressed, allowing completion to take place as planned.
But Mr C, who already owned a house with a mortgage but wanted to move to a different property while keeping his original home as a buy-to-let, said this problem led to him owing thousands of pounds, not including the mortgage.
He also said the monthly mortgage payments were double what he expected and the interest rate was far greater than originally planned.
But ombudsman John Miles said on balance Mr C would probably have bought the second property even if Openwork had given him the correct mortgage repayments from the outset.
He said it was now a matter for Mr C to decide whether he wanted to sell the property to clear the debts he took on to buy it.
Mr Miles said: “Clearly, it’s not ideal that Openwork wrongly calculated the amount Mr C needed to borrow to buy [the second property] while not selling [the first].
“But as I’ve said already, this resulted in a loss of expectation with Mr C having to pay more than he’d originally thought.
“But once the mistake had been found, Openwork apologised immediately and managed to get a substantially increased mortgage offer agreed with Lender A within 48 hours.
“This allowed Mr C to complete the purchase of [the second property] as planned on the correct date. With this in mind, I think compensation of £750 is a fair amount.”
Openwork suggested porting Mr C’s existing mortgage product to the second property and arranging extra borrowing from it to complete the purchase.
It also suggested remortgaging the first property with a let-to-buy mortgage and raising some additional borrowing on this house. Some of this extra money was to be used as the deposit for the second property.
Rather than wait for the remortgage to complete, Mr C paid the deposit for the second property from his own pocket and exchanged contracts.
The purchase price was £435,000 and a lender offered a buy-to-let mortgage on the first property of just over £151,000.
Openwork then arranged for Mr C to borrow £295,000 from another lender for the second property.
This amount included porting Mr C’s original mortgage product from the first property – an amount of around £138,000.
This meant he needed about another £140,000 to buy the second property.
Mr Miles said: “It seems Openwork thought the £151,000 from [property one] would be used to complete the purchase of [property two] and Mr C would get the remaining amount.
“But it didn’t take into account that out of the £151,000 from Lender B, Mr C’s original mortgage on [property one] with Lender A - of around £138,000 – had to be repaid.
“Only the mortgage product was being ported to P2. Mr C still had to redeem his existing mortgage on [property one].
“This meant he was only getting around £13,000 in his hand from Lender B rather than the £151,000 Openwork had calculated.”
damian.fantato@ft.com
