Moral Money: our reader is shocked to discover a sizeable debt remains on his property
Dear Sam,
My wife and I have a joint mortgage, which was due to have been repaid early this year.
To my utter surprise – and horror – I have recently found out that the mortgage has been amended by her to “interest only” for the last few years, thus leaving a sizeable balance to be repaid.
The mortgage is paid from her account by direct debit, so I have been completely unaware of the subterfuge. I had no prior knowledge of this, seeing no letters from the building society, nor signing any documents.
I have been at my wits’ end following the discovery and consider my 38-year marriage to be over in most aspects. I have had some awfully dark thoughts about my own life going forward.
That there is a great deal of equity in the house makes no difference whatsoever – it’s the deception that is becoming increasingly unbearable.
Any advice would be greatly appreciated.
– Anon
Dear reader,
Your distress at discovering your mortgage and your marriage are not as you thought is palpable and I am sorry you are going through this.
Your dilemma has a legal, economic and moral aspect. I have asked the Telegraph’s legal expert, Gary Rycroft, to comment on that part of it, while I am tackling the other elements. I want to start with the economics.
Mortgage debt is “good” debt. As a professional adviser specialising in helping clients manage personal resources to best effect, I will often recommend that inexpensive residential mortgage debt remains part of a personal financial plan in favour of more effective use of the capital in other areas.
I have to say that many of my clients will have an inclination to clearing mortgages. They aspire to be debt-free, but when you get a spreadsheet involved – instead of relying on our very human “gut feelings” – the mathematical answer is rarely to prioritise clearing the mortgage.
Gearing is how you make money using someone else’s money, and is well practised by business owners and wealth managers. Using borrowed money to leverage an opportunity to make money allows wealth creators to increase exposure or accelerate returns.
The idea being that the amount they can make exceeds the cost of the borrowing and thus delivers a profit. Gearing introduces risk as well as opportunity. There is always the possibility that the growth doesn’t materialise, or the cost of the debt ends up being higher than expected. Profit expectations can turn to ruinous losses and this must be factored in.
However, it is hard to lose money over the long term by using a residential mortgage secured at very competitive interest rates to invest in, say, a well-diversified global equity portfolio that tracks markets.
If you had done that for the past 10 years, the average interest rate, according to the Bank of England, would have been 5.74pc against an annualised investment return of 10.15pc, according to MSCI World Index to August 2024. Happy days!
Obviously, no one can guarantee the same result over the next 10 years, although the science of investing and basic economics make the probability of a positive outcome very high indeed.
You don’t mention what your wife has done with the money that was not allocated to pay off the mortgage. If she has been investing, then she probably did you a favour and there is a pot of money somewhere that can be used to pay off the mortgage balance with some to spare.
Maybe she used the money to pay bills and keep the home going through a tricky period when cost of living was rising and ends were not meeting? Maybe she was just sick of not having any money and has used the extra disposable income to fund things she wanted for herself and has thus depleted your joint financial position. Without knowing this part of the story, I don’t know if you have been disadvantaged financially or whether you are in profit.
There is a legal aspect to your situation that falls outside of my wheelhouse. Legal expert Gary Rycroft said that if this change to your mortgage was made with your existing lender, there would be no need to revalue the house or re-sign the mortgage deed. However, he would expect there to be a requirement for those named on the mortgage to sign a new loan agreement – and it is “of concern” that you were not asked to do this or made aware of the change.
It may be, Mr Rycroft supposed, that the change was authorised by an electronic signature – but regardless of whether it was by this or a “wet” signature, if your consent to the change has been given without your authority then, on the face of it, what your wife has done is unlawful and may be forgery and/or a contractual misrepresentation to your lender in breach of your loan agreement. If you think this could be the case, you may want to consult a solicitor to unpick what has happened and decide on your next steps.
It appears your wife has taken the lead with the mortgage arrangements historically and you have been comfortable allowing this. You admit you had no visibility or awareness of changes to collection amounts. It is often the case, in my experience, that couples divide the life admin between them and one is designated the finance manager for the family.
While it is a common and practical way of doing things, it doesn’t absolve you of responsibility or remove entitlement to being kept informed and contributing to decisions. I mentioned earlier that many of my clients are focussed on being mortgage-free.
It represents a milestone in their lives, a transition to a new era, and it seems you are feeling robbed of the result you thought you were on track to achieve. Out of the blue, you find the reliance you had on things working out as you expected has been undermined.
The lack of inclusion in the alteration to mortgage arrangements insults you and I agree you had a right to be consulted. I wonder, though, if after 38 years of managing the family finances, your wife thought she might be capable of making the decision and authorised by decades of taking on the delegated responsibility? I understand that this has come as a shock but as stated above there are good reasons – and sometimes essential needs – that can lead to mortgages staying around for longer than anticipated.
A discussion with your wife seems overdue. It might be worth considering whether you are going to ask to be more involved in financial planning going forward. It is easy in long-term relationships for delegation to creep toward abdication. And when it comes to finances, we should all have input and oversight of what impacts us personally.
Nevertheless, if she has been responsible for finances for decades, it may surprise your wife that you suddenly want more involvement or maybe she will be relieved to hand it over. Your wife might assume responsibility for one of the other tasks such as car maintenance or something else that has sat with you historically.
Talk about it. Express your disappointment at not being mortgage-free when it clearly meant a lot to you to achieve this. Find out where and when your paths diverged, and different priorities were born for her. It will likely be a revealing and valuable exercise for you both to revisit joint goals and ambitions exchanging communication for assumptions to avoid any further misunderstandings.
One mistake in 38 years is pretty good going and, as I said at the start, from an economic point of view, it probably wasn’t a mistake.
Hope this helps reframe your disappointment and thank you for sharing your dilemma with us.