Mortgage coming to End, Need Advice what to Do?

pennygoodall

Hi,
My Mother in law who is 80, lives in a ex council house, which was mortgaged for £21,000 back in 1990, she lives on her state pension and has no other income, The interest is paid by the DHSS and the mortgage is due to be repaid next year, a total of about £23,000. My Husband paid to modernise the property, the house is in my M-in-L's name and the property is willed to my Husband which was done in the mid 90's. The house is worth about £150,000 - £180,000 now.

My questions are
Will the DHSS try and take the house if she dies or goes into a home?

We will have to re-mortgage the property next year, can we increase the mortgage and clear some of our debts? what effect will this have with the DHSS for my M-I-L.

Should we put the house back in our name or will we get stung for Tax.

Thanks for any help you can give

RufusA

I've avoided responding to this one as I don't wish to rant, but as no-one else is going to, will chime in to bump it for you.

pennygoodall wrote: »

Hi,
My Mother in law who is 80, lives in a ex council house,...the interest is paid by the DHSS

Wasn't RTB grand - over £100k profit, AND the government pays the mortgage.
Sorry - promise not to rant.

pennygoodall wrote: »

the mortgage is due to be repaid next year, a total of about £23,000

This is the main issue. Has she spoken to the mortgage company / DWP about her options. I suspect they may be:

a) She sells the property, downsizes and clears the mortgage.
b) You pay off her mortgage and take on a fair proportion of the property ownership in return.
c) She extends the terms of her mortgage, subject to the mortgage company agreeing and DWP being willing to continue paying the interest.

At the time of taking out the mortgage, what was the proposed plan for repaying it?

pennygoodall wrote: »

My Husband paid to modernise the property

Very generous son, I hope that wasn't the cause of your current debts!

pennygoodall wrote: »

Will the DHSS try and take the house if she dies

Unless they suspect there's fraud of some sort, the DWP won't seek to recover any mortgage interest payments on her death.

pennygoodall wrote: »

or goes into a home?

Unless the law changes, if in England there will still be an expectation she will pay for her residential costs. Also she may prefer to pay for a private home for her final years or sheltered housing rather than relying on possibly a poorly run council funded place.

There is little you can do to prevent this as most schemes to avoid her having to sell the property are deemed void by the nature of their purpose.

pennygoodall wrote: »

We will have to re-mortgage the property next year

*She* will, unless she chooses to sell / give you some of the property before then. You can't get a mortgage on HER property.

pennygoodall wrote: »

Can we increase the mortgage and clear some of our debts?

*She* could increase the mortgage, BUT would possibly lose her DWP mortgage interest payments and would need to gift you the money to clear your debts.
Alternatively you could take on a mortgage and part of the ownership, but this would be subject to valuation, affordability tests etc.

pennygoodall wrote: »

What effect will this have with the DHSS for my M-I-L.

AFAIK she would lose her right to mortgage interest payments or at the very least they would be fixed at the old level. You can't use her DHSS entitlement to in affect pay the interest on your debts.

pennygoodall wrote: »

Should we put the house back in our name or will we get stung for Tax.

I don't understand the reference to "back in our name".
If *she* transfers the property to yourselves prior to her death, AND she remains in the property it won't count as a potentially except transfer and there are many tax considerations, but given the sums involved most are likely to be irrelevant to yourselves. The law is complicated in this area, so seek professional advice if capital gains or inheritance tax is a concern. Be aware though that if she requires care then the transfer may be ignored by the DWP so she would require you to sell the property to pay her costs, even if you have taken a mortgage out on it!

Please don't take this personally but from the tone of your OP, there seems to be an assumption that because your husband is presently a beneficiary in her will it confers some presumptions / rights over the property.

HTH - Rufus.

Mrs_Bumble

So the mortgage is in your m-i-l's name currently and she is 80?

Is the current mortgage on interest only or repayment? If interest only the lender will be expecting the mortgage to be cleared next year.

At your m-i-l's age she is unlikely to be able to obtain a mortgage in her own age particuarly as it is currently being paid by DSS.

If you remortgage the property into your's and your husband's name then the mortgage debt is your responsibility and so m-i-l won't qualify for ISMI and you will have to pay the mortgage.

I believe (you will need to check) but if the mortgage is in your name, and you are thinking that she could pay rent your m-i-l won't be able to claim help with rent payments as your are directly related.

Could she not sell and buy into a sheltered housing complex or something?

As RufusA says above you will all need to seek advice and guidance if you start exchanging the name of who owns the property, or who does own the property as can look like trying to get rid of assets/avoidance etc and have implications if your m-i-l needed to go into care and also for inheritance tax purposes.

I also agree in that just because the property is currently willed to your husband there is nothing stopping your m-i-l from changing her mind etc and there shouldn't be a presumption that your husband currently has a right over the property.

Seek out an IFA/estate planning specialist.

silvercar

The property is in her name. The mortgage finishes soon. So she needs to find a way to clear the mortgage. Your husband may want to help out, as the home will eventually be his. I don't know how easy it would be for you to raise the money elsewhere and loan it to your mother in law so she can clear the mortgage, but that is a possibility.

Or she could sell it and buy something smaller.


Or ask the lender to extend the mortgage term. This may be difficult given her age and lack of income.

If you want to safeguard the house value from being used to fund care homes, one option would be for her to sell up, then your husband put her next property in his name. Provided she didn't need care for a few years, this wouldn't look dodgy. Of course another option, if she needed care, would be for her to live with you, though I accept this is not always possible or desirable.

pennygoodall

Hi
Thank you all for your advice/help.

As my m-i-l has lived in the house most of her life she does not want to move, so selling and down sizing is not an option at the moment (it could well be if her health changes) as is her coming to live with us, i have offered and have room for her, but she does not want to move.

I think we need to contact both the lender and the DSS and find out how she stands, and see if we can extend the mortgage.

If not we will have to try and get another mortgage/loan to pay off hers.

RufusA
I am sorry you had to with hold your rant, but i feel i need to explain, at the time of her buying her council house which she had lived in most of her life, it had never been modernised, just general up keep, by the council.

We wanted to make sure that as she got older she would have some where decent to live, so we helped her to buy the house by being guarantors and at the time we were able to afford to completly modernise her home, which is why she said she would leave it to my husband in her will, and i know that's not set in stone, but what will be will be.

It was not done with any other thought than that, anyway once again thank you for your imput, we have found it very helpful.

dunstonh

Why doenst she look at equity release on it?

pennygoodall

Hi If she does that she would still loose her DSS payments

dunstonh

pennygoodall wrote: »

Hi If she does that she would still loose her DSS payments

Not if the payment is as a lump sum to clear a lump sum. Her position remains neutral. Although any mortgage interest support would be lost (if she gets that).

RufusA

dunstonh wrote: »

Not if the payment is as a lump sum to clear a lump sum. Her position remains neutral. Although any mortgage interest support would be lost (if she gets that).

Wouldn't the OP's Husband lose a proportion some of his inheritance though!

Rufus.

dunstonh

RufusA wrote: »

Wouldn't the OP's Husband lose a proportion some of his inheritance though!

Rufus.

Would you like to borrow this smiley to add to that: :rolleyes: