Helen Gray, associate at Robertson-Hobbins & Associates, said she recently had a client who refused to sign a mortgage application because he was unhappy with the wording on the KFI.
The problem has occurred over the wording which states that the borrower ‘must pay’ the total amount due over the term of the mortgage which assumes no overpayments, interest rates not changing and no early redemption penalties.
Gray said: “The wording is very bad in stating ‘must’. My client was frightened that even if he paid off the mortgage in five years, he would still be paying the full whack over 10 years. A better way of wording it would be ‘the amount you could pay back would be X amount’.”
She added that this situation has occurred with a number of other clients who have been uncomfortable with the wording.
Mike Fitzgerald, sales director at Brentchase Financial Services, commented: “This wording is a concern. Is it even correct legal speak? It would be much better if the KFI stated ‘if you keep this mortgage for the full term, the payments would be this amount’.”
Eddie Goldsmith, senior partner at law firm Goldsmith Williams, said: “I’m not sure this wording was an actual requirement by the FSA but rather what lenders have chosen to put. The mortgage is a contractual arrangement between the client and lender so when the client takes on the mortgage they should be aware that they are expected to pay back the mortgage over a certain period.”
“But this just highlights that KFIs are not user-friendly at the moment and need an urgent review,” Goldsmith added.
Robin Gordon-Walker, spokesman at the FSA, said: “It’s important that the documents explain what money needs to be repaid over the period of the loan. If a customer does not like the way this is expressed in the wording, they do not have to get a mortgage from that particular lender.”
