Pension Credit and Mortgage Interest Payments

notisis

I hope someone can help me here. Parents (72 and 67) own their own home subject to an interest only mortgage of £54000. Mortgage with Northern Rock where the fixed rate period ends on 1 July 2008. They are currently in receipt of pension credit and receive by way of state pension and PC top up £137.83 and £50.98 respectively weekly with a payment of £193.40 direct to Northern Rock by way of mortgage interest help. Total mortgage interest payment per month to Northern Rock is currently £235.40 and I (their daughter) make up the £42 monthly difference.

Mortgage will be increasing to £354.10 from 1 July, over an extra £100 per month, which neither my parents nor I can afford. My father has rung the Pensions Credit helpline and they told him they will only pay £190 per month towards the interest (although they pay £193.40). But oddly my having looked through the last 3 months mortgage statements and see that Pension Credit have in fact paid £200.20 per month to Northern Rock in December and January.

Does anyone know whether when the NR mortgage payments increase in July Pension Credit will contribute anything more or is it capped at some percentage rate? Looks extremely unlikely parents will be in a position to remortgage bearing in mind low income and ages.

Any help appreciated.

dmg24

Last time I checked it was around 7%. Can't remember how long ago that was, but AFAIK interest rates have only decreased since then, so it is unlikely to have risen.

If you ring the IS department that deals with ISMI, and just ask what the current interest rate payable is, they should be able to tell you (there is a number on www.saynoto0870.com x

notisis

Thanks DMG but when you say 7% do you mean they'll only pay 7% of the actual mortgage interest payment or that they base what they will pay on an interest rate of 7% on the outstanding balance?

I was wondering more if when I said capped it meant say they would only contribute up to something like 80% of the actual payment.

Sorry to be a bit thick!

dmg24

They will pay an interest rate of approx 7% of the first £100K of the mortgage interest balance, so you are fine in that respect.

I know it is unlikely, but have you looked at seeing if your parents can remortgage?

Edit: didn't put the word interest.

mitchaa

DMG24...

Not sure if we are speaking about the same thing here. I dont think the O.P is in receipt of ISMI?? Although i wasn't aware there was any other help available

If the O.P parents are on ISMI, i would of thought the full £235 would have been paid for them seeing as they are on an IO mortgage under the value of £100k

Not unless the £54k has been remortgaged at some point to take into accounts other debts or they have a current extortionate interest rate.

O.P...With their income and older age, how are they going to pay off the capital? Its still going to be £54k in 10/20 yrs time.

Silversurfer_3

You are lucky to get any help with mortgage interest payments at all.
I waited for 8 months to be told NO, I get no help at all.
Reason because my sister who I lived with died and I paid off original mortgage and re-mortgaged the house in my name only and it was not classed as a house purchase therefore did not qualify. Fortunately I only have 4 more years to go to the finish till then I live on beans on toast.

notisis

Thanks mitchaa. I would assume it probably is ISMI my parents get. My parents remortgaged to get a better rate with Northern Rock in 2004 (they were with NR since 1991) and borrowed an extra £1500 to do the bathroom up and other repairs which is shown as additional borrowing. The £54000 includes both the original mortgage and the additional borrowing. They are aware they will still owe this amount (despite being advised not to do this way back in 1991!). They are looking to move somewhere cheaper like the Isle of Wight as they could pay off the mortgage that way but in the current market houses aren't really selling (and they do need a minimum amount to make any move possible).

Having looked on pensions website it does say the allowable rate for calculating the amount of interest due is Bank of England base rate plus 1.58%, ie 6.83% from 16 March 2008. Parents old interest rate was 4.79% so I'm thinking they ought to be able to claim more towards the new payments in July. I'm waiting for Shelter & CAB to get back to me with advice.

I'm sorry you weren't able to get any help Silversurfer. I assume if you'd simply taken your share when your sister died, then actually bought a different home with a mortgage then you would have been covered as it would be a purchase.

dmg24

notisis wrote: »

Thanks mitchaa. I would assume it probably is ISMI my parents get. My parents remortgaged to get a better rate with Northern Rock in 2004 (they were with NR since 1991) and borrowed an extra £1500 to do the bathroom up and other repairs which is shown as additional borrowing. The £54000 includes both the original mortgage and the additional borrowing. They are aware they will still owe this amount (despite being advised not to do this way back in 1991!). They are looking to move somewhere cheaper like the Isle of Wight as they could pay off the mortgage that way but in the current market houses aren't really selling (and they do need a minimum amount to make any move possible).

Having looked on pensions website it does say the allowable rate for calculating the amount of interest due is Bank of England base rate plus 1.58%, ie 6.83% from 16 March 2008. Parents old interest rate was 4.79% so I'm thinking they ought to be able to claim more towards the new payments in July. I'm waiting for Shelter & CAB to get back to me with advice.

I'm sorry you weren't able to get any help Silversurfer. I assume if you'd simply taken your share when your sister died, then actually bought a different home with a mortgage then you would have been covered as it would be a purchase.

Your information is correct notisis x