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/inheritancetax/pass-money-property/pass-home-to-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.

[redken1]

“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.”

Ducatista, excellent points, some sound advice and I do agree with you on the above.


I have been with my current lender for 9 years in which time I have never been late with a single monthly payment. Due to the present economic climate I wish to downsize my property to lower my housing costs to offset rising costs in other areas in my living budget. It’s as if the new rules are retrospective. If I stay in my current property the length of the term and all the other aspects of my mortgage remain unchanged. But, if I move to a more affordable house and take my so-called portable mortgage with me, the rules are completely different.

Thanks to you and Graeme. I am going to take stock of the situation and seek advice before deciding on a plan of action.

[Ducatista]

If I stay in my current property the length of the term and all the other aspects of my mortgage remain unchanged.

I understand your point.
The situation is the lender made a contract when lending criteria were different and they have no choice now but the hold up their end of the bargain.

I am in that situation too but in a good way.
I am paying 0.99% on my mortgage. That's not a situation the lender would chose now but they are stuck with it.
That's the way the cookie crumbles and when you strike a bargain both sides have to hold up their end for better of worse.


But, if I move to a more affordable house and take my so-called portable mortgage with me, the rules are completely different.

Yes it a new contract. New lending criteria apply many of which are sensible and correspond with responsible lending in this economic climate.
A mortgage is a loan on a specific property.
Mortgages are NOT portable, lenders allow you to port your product to a new mortgage.
It's a new contract and the lender can apply whatever new rules they like (within the law) e.g. they can change LTV criteria, creditworthiness, age rules etc.

I understand that it seems illiogical that they won't give you the lending you have already got.
But the fact is if you applied for that now you wouldn't get it, you only have it because previous lending criteria allowed it at that time.

[Rabb]

Ducastista - I am aware that they Store deeds on computer these days - however when you have paid your mortgage they still have to send them on paper to you.
Paper copies of house / land deeds are the only bona fide proof of ownership.

[Mitch9128]

Mortgage??!! You capitalist pigdog, all property is theft etc etc etc























;)

[redken1]

“That's the way the cookie crumbles and when you strike a bargain both sides have to hold up their end for better of worse.”

I put it to my lender’s advisor that it was difficult for me to accept a verbal offer on my current property due to the fact that they could not agree in principle (subject to meeting all the criteria) to continue with the portable loan until I had identified a new property. He replied, “There is no legal obligation on your part Mr Glass, you can always pull out after accepting a verbal offer.”

I am a man of honour and my word and obviously play under different rules from the financial institutions, in this case anyway.

Ducatista, with reference to your comments about inheritance tax etc, we both know that rules which may be appear effective on paper are not so easy to enforce in reality.

Of course, I would never consider falling foul of the law, but I do need to wise-up and I will. Still haven’t ruled out joining all those shrewd capitalist pensioners in rented accommodation. :P

And Mitch, if Thatcher hadn’t sold of all the council houses I would have applied to rent an affordable home from my LA. ::) :-X

[Col]

Justa throw this in the mix.....

bloke agreed sale of house at close to advertised price but upon mortgage lender valuation offer was reduced by 20% ...sale collapsed :-?

There are going to be plenty of probs ahead and, unless high salaried, lenders are going to reduce amounts so either prices reduce or it all comes to a shuddering halt :o

As for rents with reduced housing benefits and assuming lower house price then rents will either reduce or there will be an abundance of empty houses

interesting :P

[Ducatista]

we both know that rules which may be appear effective on paper are not so easy to enforce in reality

The sale of a home is very easy to detect. It's all registered at the land registry.

I agree with both yourself and Snowy that there are ways to protect your wealth.
Some are entirely legal and above board, other ways are shall we say more resourceful.
Personally I would prefer to be on the right side of the law and have peace of mind rather than have my long term situation dependent on no-one finding out.


but I do need to wise-up and I will

Great, me too.
There is a lot of info at
http://www.ageuk.org.uk/
They do loads of factsheets and even books.
I do think professional advice is a good idea, but personally I'd spend some time doing my own research from the internet and books, so that when you are being charged £250 per hour by the solicitor, you are well informed and at least know what questions to ask.

[Ducatista]

however when you have paid your mortgage they still have to send them on paper to you.

They often charge a "deeds release fee" for putting them in an envelope, but once you have them you don't then have to pay the bank £40 per year for storage. You never did actually most solicitors will keep them for free. It's just another cash cow to make money from apathetic people.

The biggest advantage of keeping a mortgage if you don't need one is that it keeps a "charge" held on your property centrally at the land registry and this is an effective way of stopping fraudulent transactions as it makes it more difficult for anyone else to put a charge on your property.

[Col]

They often charge a "deeds release fee" for putting them in an envelope, but once you have them you don't then have to pay the bank £40 per year for storage. You never did actually most solicitors will keep them for free. It's just another cash cow to make money from apathetic people.

The biggest advantage of keeping a mortgage if you don't need one is that it keeps a "charge" held on your property centrally at the land registry and this is an effective way of stopping fraudulent transactions as it makes it more difficult for anyone else to put a charge on your property.

That isn't exactly fair to say as people are not told what options are available for deeds and,of course, the minutiae comlexities of having a mortgage/home/business are in place simply to create 'experts' that we can all 'enjoy' ::) paying because the info is difficult to find and the processes unduly complex due to governments fiddling about---simplicity of transaction saves cash---and almost unheard for a solly to do somat entirely free..my deeds with the mortgage lender and not checked if they charge to have them.

Not sure what you are getting at about 'fraudulent transactions' :-?

mildly interesting subject all the same :)