Mortgage Rate Rises

If youre on an interest only mortgage and can’t pay it off at the end of the term, is there any laws which prevent you from selling it to your kids for just enough to pay the mortgage off, even if it’s well under 50% of the market value?
 
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robfosters said:
If youre on an interest only mortgage and can’t pay it off at the end of the term, is there any laws which prevent you from selling it to your kids for just enough to pay the mortgage off, even if it’s well under 50% of the market value?
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ivrytwr3 said:
And on your last comment, that's the whole point, there won't be anything left of your assets if you have to fund your own care, where as the Gov will foot the bill for you and you could have given your kids your £££'s throughout your life.
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The government don't just sell your house and take the lot in one go. Apart from which needing a care home isn't a certainty, around 5% of the population over 65. So 5% of those people who lived the high life are going to end up in a care home with everything paid for, leaving the other 95% working until they die or living off state pension only, not great odds those.
 
Foghorn Leghorn said:
Of the people I know who've spent everything they've earned and have nothing to show for it, they're now hitting their 50's. Renting and general living is more expensive than it's ever been, yes they've had some flash holidays and cars but they're now starting to realise they're in the ****, they're working full time until they die. Personally I don't fancy working into my 70's maybe 80's or praying that I need to go into full time care just so I can stop working.
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This i do agree with. Those who have their own homes, mortgage free - won't have rent to cover. That's why we purchased, the safety and security of our own home, not to fund care fees while others who haven't done similar, get the same.

Hopefully we won't need a care home and the house can be split between the kids.
 
robfosters said:
So basically, if your parent doesn’t die within 7 years, you’re sound
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For Inheritance Tax purposes basically yes (though it's also tapering relief over the 7 years, ie: if they died after 6 years, 6/7's of the value would be exempt iirc)

For the Council to investigate an intentional deprivation of assets to avoid care costs, there is no time limit to that.

I've been through all this with my parents as they had an interest only on part of their mortgage and they couldn't pay off in the end. So I paid off the balance for a % stake in the property, which we then put the house into a Trust to split the ownership. The solicitors were very careful to ensure it was done explaining why and that there was no intentional deprivation of assets.
 
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flea.rider said:
strange ?? my brother and his wife have the house ..her mothers house and about 1/2 mil in a trust for the kids/grandkids .. can't be touched .. thats how the rich do it ..
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It can be done, you just have to be clever about it because if it looks like you have done it intentionally as a 'deprivation of assets' to avoid care fees then it can still be classed as the original persons estate and claimed by the Council.
 
Freakbro said:
It can be done, you just have to be clever about it because if it looks like you have done it intentionally as a 'deprivation of assets' to avoid care fees then it can still be classed as the original persons estate and claimed by the Council.
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yeah .. but theres more money there ..so shouldn't happen ..
 
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GordyR said:
I think that unaffordability based selling and/or downsizing is happening more often right now than people would like to admit, and I think it's fairly likely to become even more common over the next twelve months.
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Moving house has big costs of its own though in movers, solicitors, surveys, and stamp duty. If people are doing this then it can only be worth it with an epic reduction in the amount they owe surely, so coming with a huge downsize or moving to a much cheaper area. I'm not saying it's not happening - but I'd be surprised if it's super common yet, it's not normally that easy to move a long way away either without a lot of other changes in your life (unless your young and or without dependents/family)
 
Nutty667 said:
What's your LTV ? My 0.9% ends in 3 years. I'm hopeful rates might drop some by then.
Have you considered increasing term to reduce monthly costs ?
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LTV calculator says 23.75% yeah i may do that or go 6 months interest only....

we are selling next year as we are downsizing anyway so it really makes no odds losing a few grand here or there
 
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robfosters said:
So basically, if your parent doesn’t die within 7 years, you’re sound
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  • Unless your parents estate is worth over £650k (325k each) the 7 years is nothing to worry about - IHT won't apply whether they gift it to you now or you inherit their estate.
  • If the estate is worth over 650k, IHT over the 7 years is tapered so may still not make much difference.
  • If their combined estate is worth significantly over £650k and they gifted to you, it'd be best if they either survive another 7 years or you just wait and inherit the property so you can apply the nil rate residence band (another £175k each).
People who have been coasting along on an interest only mortgage without a repayment strategy are starting to feel a world of pain :(
 
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EvilRob said:
  • Unless your parents estate is worth over £650k (325k each) the 7 years is nothing to worry about - IHT won't apply whether they gift it to you now or you inherit their estate.
  • If the estate is worth over 650k, IHT over the 7 years is tapered so may still not make much difference.
  • If their combined estate is worth significantly over £650k and they gifted to you, it'd be best if they either survive another 7 years or you just wait and inherit the property so you can apply the nil rate residence band (another £175k each).
People who have been coasting along on an interest only mortgage without a repayment strategy are starting to feel a world of pain :(
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Not really in our case. Mum’s already got enough equity to sell up and buy a house further out. Just looking at options really.

I think she should sell up now. She works from home so could be out of London in a little forever home with no mortgage to worry about and all her wages in her pocket. She’s stubborn though, likes where she is.
 
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EvilRob said:
People who have been coasting along on an interest only mortgage without a repayment strategy are starting to feel a world of pain :(
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Are there many people who have been doing that outside of BTL mortgages and they have probably been banking on house price increases more than anything else for their profits.
 
robfosters said:
If youre on an interest only mortgage and can’t pay it off at the end of the term, is there any laws which prevent you from selling it to your kids for just enough to pay the mortgage off, even if it’s well under 50% of the market value?
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Stamp duty is calculated at a fair value rate not discounted rate so watch out for that.
 
ImMrChris said:
LTV calculator says 23.75% yeah i may do that or go 6 months interest only....

we are selling next year as we are downsizing anyway so it really makes no odds losing a few grand here or there
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That's a low LTV, so would expect you're getting preferential rates from what's out there!
We're about 38% atm.
 
Nutty667 said:
That's a low LTV, so would expect you're getting preferential rates from what's out there!
We're about 38% atm.
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At these levels LTV doesn't matter right? From what I've seen anything under 60-70 makea for very small changes.
Even 80-70 was really small for me.
 
fez said:
Are there many people who have been doing that outside of BTL mortgages and they have probably been banking on house price increases more than anything else for their profits.
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Seem to be quite a few still, FCA link
This says 750k wholly interested only regulated mortgages, or 9% of market. BTL mortgages generally aren't regulated, so I think the majority of those would be normal home owner mortgages.
 
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