How to check your mortgage

Up to half of all home loan repayments may be miscalculated.
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Ever had a feeling that your mortgage lender is charging too much for your home loan? If so, join the queue. The intricacies of borrowing money from banks, building societies and other lenders are bad enough. They become even more difficult to understand with every subsequent change of interest over the years, the changes from one type of loan to another, from repayment to interest-only and back again, where mortgage books change hands or special offers come to an end.

For the vast majority of people, the only solution is to trust their lender. After all, to second-guess every financial twist and turn in a bid to determine whether the charges being applied are actually correct is only likely to lead to a massive headache.

But many thousands of people every year are left with the feeling that, somehow, they have paid too much. Or that what they have paid to date has not been fully credited.

A new system, promoted by Chase De Vere, a firm of mortgage brokers, aims to simplify the whole exercise. For a fee, the company will run an audit of all mortgage payments and determine whether overpayments have taken place.

The "Mortgage Audit" aims to allow borrowers to identify errors so that they can claim back any overpayments.

The company claims that of 2,400 pre-launch audits carried out under its computer system, using information supplied by lenders themselves, it found that overpayments had in fact been made in 45 per cent of cases. The average discrepancy on a typical mortgage of pounds 47,000 was in the region of pounds 1,600.

Simon Tyler, managing director at Chase De Vere Mortgage Management, says: "Errors can often occur in the calculation of mortgage balances when interest rates change and when discounts or fixed rates end.

"The problem is even more widespread because of the building society mergers in recent years, which has increased the possibility of errors. It is unlikely that any lender is perfect at calculating mortgage balances. All of them can make mistakes. A single keystroke error is all it takes."

Mr Tyler argues that it is worth people looking in more detail at what is usually their largest financial commitment.

The service on offer by Chase De Vere costs pounds 99.99, but the company is currently making it available for pounds 74.99.

The company says it has been inundated by applications from borrowers asking for their loans to be examined by the Mortgage Audit.

However, the mortgage analysis scheme has come under criticism by mortgage lenders themselves. Sue Anderson, at the Council for Mortgage Lenders (CML), argues that the auditing system on offer is - by definition - an unrepresentative one.

She says that those most likely to make use of Mortgage Audit's services are those who already feel there is an error with their loans.

Ms Anderson adds: "Previous assumptions on which [Mortgage Audit] has based its audits have included regarding the annual rest system of paying interest [where the amount repaid each year is only deducted from the capital owed every 12 months, a common practice among lenders] as `wrong' and therefore an error. Such past misunderstandings or odd interpretations do not inspire confidence in these headline figures."

The experience of one person who had her mortgage payments looked at by Mortgage Audit proves both that mortgage lenders make mistakes and that they don't.

Anna Preece, a journalist living in Kent, was the victim of a shabby and inept mismanagement of her mortgage accounts at the hands her lender.

Between 1987 and December 1995, when Ms Preece finally redeemed her loan, the society managed one blunder after another in connection with her mortgage. Indeed, this continued long after she paid the building society its loan back. The society failed to refund the remainder of her buildings insurance for months.

When she asked for the interest rates applied to her account over the period of her mortgage, the society managed to get that wrong too. The result was that an audit of her account showed overpayments by Ms Preece of more than pounds 300.

It was only when she asked for a refund of this amount that the society then "discovered" that the interest rates it originally sent her were wrong.

Surprisingly (or not) when the new figures were checked by Mortgage Audit, they tallied after all with the charges levied by the building society on Ms Preece's account.

Tim Grundon, at Chase De Vere, accepts that Mortgage Audit's figures tallied with those of the building society. But he says: "It is funny how in our experience when we do discover a discrepancy, the lender concerned manages to come up with another set of figures which narrows any amount owed."

So what should the wary borrower do? Sue Anderson, at the CML, probably offers the best suggestion: "If anyone does believe that an error has occurred - and all lenders admit that mistakes can occasionally occur - they do not need to pay a fee to put matters right. The relevant Ombudsman scheme or their local Citizens Advice Bureau will be able to help them for free"n

Chase De Vere Mortgage Audit, 14 Ryder Street, London SW1Y 6QBu. Or call 0181-938 3940

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