Being charged commercial loan interest rates on a family home

[Brendan Burgess]

A friend of mine took out a mortgage 10 years ago on their family home and has only recently discovered that he has been charged commercial rates all the time. So he is paying around 9% at the moment on a house with an LTV of 50%.

The contract says "commercial mortgage" although the lender knew that it was his family home.

It has never been used for any commercial purposes.

At the time he was involved in property investment and had a number of properties and a number of commercial mortgages, so he didn't think much about it.

From a legal point of view, he signed the contract, so I am not sure if he has any legal argument.

Is there any other argument he could use? The CPC probably was not in place at the time he took out the loan.

Brendan

 

[Andy836]

Has he asked the bank about it? 9% is nuts.

 

[MrEarl]

Hello Mr. Burgess,

It would be usual for a (Non-) Family Home Declaration to be signed confirming this property is not and would not become the principal residence, so did the borrower make a false declaration or was there no declaration ever made ? ... if a declaration was never made, that might offer some potential to go back at the lender but clearly that's one for the legal eagles.

Is the 9% pa a fixed rate out of interest ? If not and assuming the Borrower qualifies for a homeloan with the traditional homeloan providers, I'd be strongly recommending an immediate refinance (regardless of whether or not there is potentital to seek compensation from the current lender).

10-years is a very long time to have a loan without noticing you are on a commercial rate... not least given the amount of publicity around low interest rates, tracker rates -vs- SVRs etc. in the last few years. An experienced investor would be expected to be aware of lending rates and check their loan statements, also they might well have access to professional advisors who would assist with tax returns, legal transactions, management of finances etc. That all undermines any case this borrower might have imho.

 

[Monbretia]

Was the mortgage taken out to actually buy the family home or taken out as an equity release on the family home to purchase or assist in the purchase of some of the commercial property?