Consolidating second mortgages

Some brokers, Money Boomerang claims, do not take into account the financial cliff facing those who take on a mortgage that will run beyond their retirement, when their income is likely to drop significantly.

The sub-prime mortgage market has been in the spotlight before over dubious practices, with the Financial Services Authority finding in 2010 that some brokers were misleading potential customers with poor advertising materials.

With the banks' credibility holed below the waterline once more, what is starting with a trickle of claims could soon become a torrent.'Other forms of mis-selling being considered include people with interest-free mortgages being encouraged to take loans out against their property; extending the loan term without a customer's knowledge; and brokers not doing adequate checks to ensure a customer can afford the repayments should their mortgage run into retirement.

The Council for Mortgage Lenders has issued a robust response to claims that tens of thousands of people could be entitled to compensation, stating it had not seen any evidence of widespread mis-selling in the market, and that procedures are in place to handle the 'occasional' case where someone has been a victim.'With around 11million mortgages in existence, problems will occasionally arise, but there is no evidence of widespread mis-selling – when people suffer difficulties, they are usually because of changes in their circumstances rather than problems with the original mortgage.'As with any financial product, if a consumer believes they have a legitimate complaint about their mortgage or how it was sold, the Financial Ombudsman Service offers a completely free and fair service that can provide redress if appropriate.'Money Boomerang said it will focus primarily on mortgage brokers, with its head of mortgages division Ian Barlow telling This is Money that high street banks tend to have stricter procedures in place to prevent this kind of mis-selling, whereas some brokers may pick products that provide the highest commission.

Having paid off a certain element of a mortgage, a broker extends the term, say from 20 to 25 years, without their knowledge and without providing a comparison of the shorter term and longer term implications.

It is possible to refinance first and second mortgages, combining them into one.

Customers are sold interest-only mortgage products without checks being made on the repayment vehicle they in place for when the mortgage matures to ensure it is adequate, or simply were not told they needed a repayment vehicle in place.


In this article, Pacific Funds portfolio managers, JP Leasure and Michael Marzouk, discuss the loan market, outlook, and portfolio strategy for the remainder of 2017.

If your first mortgage is not more than 80 percent of the loan-to-value ratio of the house, you probably don't pay premium mortgage insurance, even if the addition of the second mortgage exceeds the 80 percent benchmark.


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