Mortgage underfunding
Types of complaints we see
Mortgage underfunding occurs when mortgage payments aren’t set up on the correct basis, meaning the customer isn’t paying enough – usually without realising. The customer is then faced with paying back more than they expected, or over a longer period.
People who contact us in this situation often aren’t sure how the problem happened. They tell us:
- the underfunding isn’t their fault – they were just paying what you told them to pay
- they made a mistake and you won’t help them
- they accidentally set up a standing order for less than the agreed monthly payment
- their mortgage broker made the mistake and gave them the wrong information
Mortgage underfunding is different from a shortfall or problems that might be faced on an interest-only mortgage.
Handling a complaint
You have the opportunity to sort things out before we get involved. If a customer complains and you don’t respond within the time limits, or they disagree with your response, then they can come to us.
Find out more about how to resolve a complaint.
What we look at
We’ll need to find out if the:
- mistake was made by the customer, the lender or the broker
- lender gave the customer clear information about the repayments
- mortgage broker gave clear information to the customer
- customer knew they weren’t paying enough
- customer could have reported the problem sooner
We’ll check that the lender acted fairly when the problem was reported, even if it was the customer’s mistake. We’ll want to know that they’ve worked with their customer to set up a reasonable repayment plan.
Putting things right
In some cases, we’ll ask lenders to put their customer in the financial position they’d be in if the mistake hadn’t been made. This may mean writing off a customer’s debt.
We understand a lender’s concern at being asked to write off a customer’s mortgage underfunding. But if customers don’t realise they’re paying too little each month, expecting them to make up the amount might put them into hardship.
If the lender made the mistake
We’ll usually tell them to change their customer’s account balance to what it would be if the correct payments had been made. This could mean writing off the extra money. If the customer didn’t tell their lender about the problem straight away, we might tell the lender to either pay the underfunding up to the point the customer realised about the mistake, or pay the underfunding to the point the customer should have realised.
Sometimes customers are aware that their lender has made a mistake – and carry on paying the wrong amount. We’re likely to say it’s fair for the customer to then pay the outstanding amount.
If the mortgage broker made the mistake
We’ll tell them to make up the money that should have been paid.
If the customer made the mistake
We’re unlikely to suggest writing off the money. But we’ll encourage the lender to work with their customer to arrange a fair way to pay the outstanding amount.
Case studies
The lender makes a mistake, but the customer realises
Mortgages
The customer doesn't realise the quote given by the lender is wrong
Mortgages
Resources
Search our decisions database to find out about past decisions on complaints involving mortgage underfunding.
