Help : My Dad's Mortgage is ending and he's too old to remortgage

dj0014

Hello,

I am hoping someone out there can support me with some advice on following situation:

• My dad only became aware upon my mothers death that she was only paying an interest only mortgage and there was no vehicle to pay back the capital owed of £40k - really sad day as I had no idea either
• My dad whilst living alone in the last 3 years has been having interest on that mortgage paid by pension credits (SMI)
• He is over 75 and has been refused an extension by natwest to the mortgage due to age
• The house is worth £160k

I have an ability to pay back the mortgage myself, paying the £40k owed to natwest in form of cheque, but I am not sure how this would work and therefore have had lots of conflicting advice on best course of action and one to secure his benefits whilst still alive and not compromise future inheritance as a sole heir.


Solutions people have talked about



1. Pay the £40k and seek a deeds of trust for this amount - should he go on to need a care home etc

2. Buy my fathers house on a buy to let basis and seek rental support from the DSS whilst he lives there - would this work?

3. My dad sells us the house for £40k but then hit by capital gains tax when we eventually sell upon his death and no longer needing the house


Any better options are welcomed from those of you that can help - I thought this would not be that uncommon, but after hours on searching on internet, speaking to financial advisers and legal teams there has been no one common answer just conflicting advice.


Heres hoping someone can point me in the right direction


Thanks in advance

Ms_Chocaholic

Could he sell the house and move into sheltered housing, he would have a lump sum from the sale of the house though so would have to pay full rent

Annisele

I'm not advising, just offering a suggestion - which may be hopelessly unsuitable for your circumstances.

Could you lend your father £40k on an interest free basis? If you needed to you could secure the loan on his house, otherwise you could just draw up loan documentation. He would then have the £40k to use to pay off his mortgage himself.

Simon_gloster

And people kick off at lenders because they want further borrowing but are not willing to change their current i/o mortgage to rep as they have no plan in place.

The op highlights the wrong doing of lenders and 'some' brokers alike in the easy days and are trying to rectify the situation before many end up like this poor bloke.
Dj, there are far too many options, and complex ones at that.

Youve sought legal advice, do it again.

grey_gym_sock

(1) might work. you just need to be clear exactly what you are supposed to be repaid and when. i.e. is it £40k with no interest or increase if the house goes up in value? (at 75, your father will hopefully live for many years, after which £40k may be worth a lot less than it is now.) would you only be repaid when the house is sold or after your father has died? would you have any right to insist the house is sold sooner? (i'm sure you wouldn't want to do that, but consider that if you were going through bankruptcy or divorce, it might not be up to you.) if these questions can be answered in a way that works for both you and your father, this looks possible.

(2) the DSS would probably refuse to pay the rent on the grounds that it's a "contrived tenancy", meaning you wouldn't evict him if he didn't pay any rent. also, wouldn't your father have £120k cash left over after repaying the mortgage, and so lose any means-tested benefits?

(3) your cost basis for CGT would be the house's value when you bought it, not the lower amount you actually paid. however, by effectively giving away money now, your father might (or might not) be affected by the 'deprivation of assets' rules if he later needs to go into a care home. (the house might also still count as part of his estate, as a 'gift with reservation', because he's still living there, though this doesn't matter if his estate would still be under £325k.)

in general, it is more straightforward to keep a house owned by its occupant. and one is better off owning one's house rather than other assets for the purposes of means-tested benefits, because the house is disregarded for most of them (except paying for care homes).

dj0014

Thanks to grey gym sock

Essentially my dad would not move in with us - pride etc

So naturally really worried that care home will be the only option and wanted to avoid the horror of those fees

Based on the post it would certainly be less than £325k - could you explain more on the deprivation of assetts rule?

Thanks in advance

grey_gym_sock

the £325k figure was for inheritance tax, i.e. it's paid when somebody leaves more than that. that's a separate issue from 'deprivation of assets'.

'deprivation of assets' is a rule relevant when somebody needs to go into a care home. they have to pay their own fees until nearly all their assets are gone, including their house (though the local authority will advance some money while a house is being sold). the 'deprivation of assets' rule says that, if they gave away assets in order to avoid paying for a care home, they will be expected to pay as if they still had the assets they'd given away. it's often not at all clear who will be caught by this rule; if your father is 75 but doesn't currently need a care home, then it's hard to say whether it would apply.

Mojisola

dj0014 wrote: »

So naturally really worried that care home will be the only option and wanted to avoid the horror of those fees

The disadvantage of avoiding the fees is that you lose the choice of where you will spend your last years. In some areas the funded homes that you will be put in to are as good as others but not everywhere.

My Dad is at the point of moving into a residential home and I'm really glad that we can make the decision as to where he goes.

somethingcorporate

Have you considered joining your father on the house deeds and getting a sole mortgage in your name for the rest of the property.

If you were tenants in common it could also protect the home being sold for care fees if it was later required.

Probably worth seeking legal advice on this as it is a complex area.

handytips

Equity release is another option for your Dad, at his age you would be able to raise enough on the property, given its value and he lives there for the rest of his life without a mortgage payment. Interest is compound at approx 6.5% this option seems ideal given the circumstances. Otherwise ask your dad to sell you the property as a consessionary purchase, however this will probably have to be on a repayment basis.

Conrad

Be aware if Dad sells house to you, or allows you to join the deeds, he would loose the house if for example you (or your surviving spouse sometimes) went bankcrupt. For example say you were in a coma and unable to pay the buy to let mortgage payments.