Mortgage changes

[redken1]

As some of you may know my house is on the market as we are downsizing (hard times). A few weeks prior to this I contacted my lender to seek confirmation that the fixed rate mortgage on the property was portable. Although I was sure it was I felt the need to go over a few details. Anyway, the advisor confirmed all was in order.

I contacted the lender again last week to inform them that the property was now up for sale. Turns out that it is the product which is portable and I need to be reassessed when and only when I have found another property I wish to purchase. Apparently, due to changes in lending criteria, my lender was unable to agree in principle to the continuation of my current arrangement. Annoying to say the least as under the terms of my agreement, should I settle the loan early I would have to pay a £2000 penalty. I have paid the selling agent £450 fees upfront.

It gets worse - My current mortgage would be paid in full when I reached 67 years old, the official retirement age. Again, according to my lender the new rules will mean that unless I can show them that I have the means to pay it off they will shorten the length of the term of the loan. This is because I am a painter and decorator. The lender takes the view that it is unlikely that I will be fit enough to continue working in my current occupation until I reach 67. Perhaps I didn’t help my cause when I replied, “Tell that to the government.” A shorter loan term will mean higher unaffordable monthly repayments. With this in mind I thought I could offset this by making a lump sum payment from the profit of my current property. Not so, as I would have to pay a £2000 penalty.


Off course, I could just sell the house, bite the bullet and pay the penalty. Give my two children their inheritance early; buy a bike and a winter hack. Go on holiday, move in to a rented property, retire at 65 and the state can pay my rent till I die.

Sorry this is a bit long, but I find all this financial crap very confusing. I just want an easy life and it seems so complicated. :-[

Please tell me if I haven't explained myself very well.

[Col]

The new rules are to tighten up the free and easy lending that has gone on in the past. You will have to show that the loan can be repaid and those over 50 ?? will have trouble actually getting a mortgage especially a new 25 year one as they may not be able to make repayments when they are retired :

Think there are also issues now with these 'buy to let' interest only mortgages which I believe will be phased out as proof of ability to repay the initial loan [s] is required

No doubt there will be ways around the new regulations but there is going to be probs for sure also the possibility that house values will fall due to these new lending rules

Have to see what happens from 2014

[redken1]

The new rules are to tighten up the free and easy lending that has gone on in the past. You will have to show that the loan can be repaid and those over 50 ?? will have trouble actually getting a mortgage especially a new 25 year one as they may not be able to make repayments when they are retired :

Think there are also issues now with these 'buy to let' interest only mortgages which I believe will be phased out as proof of ability to repay the initial loan [s] is required

No doubt there will be ways around the new regulations but there is going to be probs for sure also the possibility that house values will fall due to these new lending rules

Have to see what happens from 2014

I know, but they have moved the goal posts halfway through the game. >

On the retirement age, the lenders are right - I have been saying for ages that most manual workers like labourers, brickies and cleaners will not be physically fit enough to continue working until they are 67. I’m knackered now when rolling out ceilings all day. :-[

[KP]

A mate of mine was going to be penalised for paying is mortgage off early as well..... This was a few years ago.... I think he payed it all off but left £1 outstanding ..... This incurring no penalty.

[Rabb]

The one pound thing is good - as the mortgage company has to store your deeds (as you have money outstanding on the loan)

It costs about £40 per year to safely store house deeds!

[Ducatista]

[Give my two children their inheritance early

There are rules to stop this too (quite rightly).
You cannot deliberately deprive yourself of assets and then claim state benefits (I know you were joking).

The lender takes the view that it is unlikely that I will be fit enough to continue working in my current occupation until I reach 67. Perhaps I didn’t help my cause when I replied, “Tell that to the government.”

Theorectically this doesn't mean you can't do a less demanding job physically.
Of course in practice it's not so simple. We can't all work in B&Q and if you've been a plumber all your life you might not have the skills for an office or retail position.

A mate of mine was going to be penalised for paying is mortgage off early as well.

You will only have a penalty if you chose to have one which you would have done in return for a supposedly good deal (whether it was good in hindsight may be a different matter).
Some people might say this is holding up your end of the bargain.

The one pound thing is good - as the mortgage company has to store your deeds (as you have money outstanding on the loan)
It costs about £40 per year to safely store house deeds!

Your out of date.
Deeds are held on computer these days so there is no issue anymore with storing the paper versions.

I am somewhat sympathetic to your situation Ken, but I do think the loose credit where 125% mortgages were given to anyone that could fake a P60 did bring us to a bad place and it does need to be addressed.

[Snowy]

Ken, get some info off this site - if you're serious of course:

http://www.hmrc.gov.uk/inheritanceta...children.htm#1

You can pass on your home to your children as a gift and avoid inheritence tax as long as you live for 7 years after doing so.

[Ducatista]

You can pass on your home to your children as a gift and avoid inheritence tax as long as you live for 7 years after doing so.

This is fine as long as you can support yourself for the rest of you life but not if you want to

retire at 65 and the state can pay my rent till I die

The link above relates to avoiding Inheritance tax.
However you cannot (quite rightly) give away everything and then expect the state (or taxpayers) to pay your rent or keep you in long term care (basically claim benefits).

It's called "deliberate deprivation of assets" if you want to google.
Passing your home to your children is a big red flag to the authorities.

Of course there is nothing wrong with sensible financial planning so I'm sure a resourceful person that chose to give generous wedding/Xmas/birthday gifts or perhaps employ their children would probably be able to plan to pass on some of their wealth, indeed cash on a frequent basis would be impossible to track, but that's entirely different to a single large transaction like a house.

That last bit isn't advice BTW I'm just pointing out that you are allowed to implement sensibel financial planning.
The problem is that none of us know how long we're got or how fit we're going to be, so it's rather hard to plan.

[Snowy]

I would advise on getting some professional advice, having been through this recently with my parents and their own planning for the inevitable, there are some things you can do to reduce the financial liability and retain a roof over your or your parents heads. Just don't leave it until the last minute because then it will be too late.

[Ducatista]

My current mortgage would be paid in full when I reached 67 years old, the official retirement age

I think you are possibly incorrect here (although I know people give incorrect profile information for id protection purposes).
If you are the age it says in your profile then your state retirement age is 66.
I hope I've brought you some good news there :-)
It's only younger people (born after 1968) who have a state retirement age beyond 66.
Mine is 66 and 1 month.

The obvious solution would be to bring the mortgage term down slightly to fit in with the lenders rules e.g. age 65 or 66. That should not be a massive difference in payments.