Deeds Problem

croyland87

Hi me and my father own a property jointly on a interest only mortgage which we took out in 2006 soon later my father had a major heart attack which left him not capable of returning to work and started claiming benefits and interest payments on the mortgage. The property was bought for £178000 and currently there is £148000 outstanding minus £4500 for loan payments the current house value is £190000.

My lender cant offer me anything I mean going from interest only to repayment because they haven't got a lending license. I have spoken to Halifax bank and they said that because applicant 1 my father is 66 years old all they can offer me is a 4 year mortgage even if I carry on staying with my current lender as we have 11 years remaining on mortgage the house is going get repossessed I am in a dead end.

I have spoken to a solicitor and have been given the advice that if I take my dad off the deeds transfer in to my sole name and switch remortgage at the same time to a new lender its the best way forward to secure the house for my self and my children. But I need some advice on what will the DWP say obviously the interest payments will stop but my dad is on State Pension and gets £189 a week will the DWP ask for the money all the money paid in interest to be paid back? or will they look at the equity in the property? will dads pension be affected? and as no money is involved just a transfer deprivation of assets?. I look forward in hearing from people Thank you

Foxy-Stoat_3

Does your current salary allow you to borrow £152,500? That would be the first hurdle.

Your Dad will need to take professional advice about giving his asset away.

If you are able to save £1100 a month now, then you can have the house paid for in 11 years, assuming you have not been saving £616 a month away for the repayment vehicle since 2006.

croyland87

Foxy-Stoat wrote: »

Does your current salary allow you to borrow £152,500? That would be the first hurdle.

Your Dad will need to take professional advice about giving his asset away.

If you are able to save £1100 a month now, then you can have the house paid for in 11 years, assuming you have not been saving £616 a month away for the repayment vehicle since 2006.

Yes my salary does allow me to borrow £152,500

jamesd

The DWP will not ask for any money paid in interest back. Nothing you have described ha any effect on the state pension. It can have an effect on pension credit, though.

Why does 11 years remaining on the mortgage mean that the house is going to get repossessed? Are they threatening to do that now? If so, what reason are they giving?

Unless they have some reason to do that there is no reason for the house to be repossessed. All you two have to do is arrange to have enough money available to pay off the mortgage in 11 years. You do not have to switch to repayment, You do not have to make overpayments. All you need to do is be able to hand over the £148,000 less loan payments.

One way to do that is to put money into a savings account, say an ISA. Or in investments in a stocks and shares ISA for six years, then gradually switching to cash over the remaining five years. Ignoring interest on the savings/investments that would take saving £1122 a month. If you averaged 2% interest it would take £1002 a month.

Even if the current place won't let you switch from interest only, do they allow overpayments? That might be an option but it has the disadvantage that you are paying but the ownership is split, so you could potentially lose your money if he needs care. Not immediately, but whenever it is eventually sold.

What is the interest rate on the mortgage? Is there any current sign that you father will need residential care in the next say five to ten years?

You wrote that you own it jointly. Which way is it owned jointly, as "tenants in common" or as "joint tenants"?

If your father has 50% ownership he has a value of £52,000 / 2 = £26,000 in the property equity. A common rule used for pension income taking is that a person can take 4% of the value of a pot of money as income and not have a large chance of having to take a big cut in income close to the end of their life. 4% of £26,000 is £1040. Would your father still be entitled to any benefits with that much extra income being available? If not, then you have one easy enough solution: he can sell you his half interest and you can remortgage to a new lender as part of buying him out.

Alternatively your father can get more income still if he chooses to use the £26,000 to fund living while deferring the state pension. You can start deferring once even after claiming the state pension. For each year of deferring and not getting state pension income, his state pension will be increased by 10.4%. Your father is on £9,828 a year of state pension at the moment, so if he spent £9828 of the £95,000 plus whatever he gets in benefits his state pension would have increased in value to £10,850 a year / £208.66 a week. Do this for three years and it would increase to £12,894 a year / £247.96.

You mentioned that your father has had a heart attack that stopped him from working. For those who have medical conditions that reduce their life expectancy there is a type of annuity called an "enhanced annuity" that pays more income than standard annuities, up to maybe 40% more. This would still probably be a bad deal compared to deferring the state pension but it is worth comparing the amount of income that some part of the money could buy.

It appears that the best solution is one of these two:

1. You just saving/investing the money so you can clear the mortgage when it becomes due.
2. You buying him out then him using the money to boost his income so he no longer needs or is eligible for benefits. without having to pay any mortgage interest his income could be plenty for that. If not, he could defer the state pension for a while until it has increased enough to meet his needs.

croyland87

jamesd wrote: »

The DWP will not ask for any money paid in interest back. Nothing you have described ha any effect on the state pension. It can have an effect on pension credit, though.

Why does 11 years remaining on the mortgage mean that the house is going to get repossessed? Are they threatening to do that now? If so, what reason are they giving?

Unless they have some reason to do that there is no reason for the house to be repossessed. All you two have to do is arrange to have enough money available to pay off the mortgage in 11 years. You do not have to switch to repayment, You do not have to make overpayments. All you need to do is be able to hand over the £148,000 less loan payments.

One way to do that is to put money into a savings account, say an ISA. Or in investments in a stocks and shares ISA for six years, then gradually switching to cash over the remaining five years. Ignoring interest on the savings/investments that would take saving £1122 a month. If you averaged 2% interest it would take £1002 a month.

Even if the current place won't let you switch from interest only, do they allow overpayments? That might be an option but it has the disadvantage that you are paying but the ownership is split, so you could potentially lose your money if he needs care. Not immediately, but whenever it is eventually sold.

What is the interest rate on the mortgage? Is there any current sign that you father will need residential care in the next say five to ten years?

You wrote that you own it jointly. Which way is it owned jointly, as "tenants in common" or as "joint tenants"?

If your father has 50% ownership he has a value of £52,000 / 2 = £26,000 in the property equity. A common rule used for pension income taking is that a person can take 4% of the value of a pot of money as income and not have a large chance of having to take a big cut in income close to the end of their life. 4% of £26,000 is £1040. Would your father still be entitled to any benefits with that much extra income being available? If not, then you have one easy enough solution: he can sell you his half interest and you can remortgage to a new lender as part of buying him out.

Alternatively your father can get more income still if he chooses to use the £26,000 to fund living while deferring the state pension. You can start deferring once even after claiming the state pension. For each year of deferring and not getting state pension income, his state pension will be increased by 10.4%. Your father is on £9,828 a year of state pension at the moment, so if he spent £9828 of the £95,000 plus whatever he gets in benefits his state pension would have increased in value to £10,850 a year / £208.66 a week. Do this for three years and it would increase to £12,894 a year / £247.96.

You mentioned that your father has had a heart attack that stopped him from working. For those who have medical conditions that reduce their life expectancy there is a type of annuity called an "enhanced annuity" that pays more income than standard annuities, up to maybe 40% more. This would still probably be a bad deal compared to deferring the state pension but it is worth comparing the amount of income that some part of the money could buy.

It appears that the best solution is one of these two:

1. You just saving/investing the money so you can clear the mortgage when it becomes due.
2. You buying him out then him using the money to boost his income so he no longer needs or is eligible for benefits. without having to pay any mortgage interest his income could be plenty for that. If not, he could defer the state pension for a while until it has increased enough to meet his needs.

The reason after 11 years the house is going to get repossessed is because are mortgage is with NRAM and they haven't got a lending licence and will not put me on repayment and there is no why they are going to give us more term years after 11 years. We cant pay£148,000 in 11 years I just cant see it happening. The current interest rate on the mortgage is 4.12% there is no current sign that dad will need residential care in the future the property is owned by both of us as (Joint Tenants) he gets State Pension and DLA only.

Foxy-Stoat_3

Think the main reason it may get re-possessed is that you and your Father didn't set up a repayment vehicle when you took out the interest only mortgage.

croyland87

Foxy-Stoat wrote: »

Think the main reason it may get re-possessed is that you and your Father didn't set up a repayment vehicle when you took out the interest only mortgage.

Well the plan was to remortgage after the 2 year product ended and go to repayment but father lost his job and then Northern Rock went bust and went over to NRAM

Foxy-Stoat_3

As you are around 75% LTV then a good broker should be able to get you on a repayment mortgage on your own. The issues with your Father living there and signing his asset away will be something he will have to take advice on.