Housing and independent living
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End of Mortgage Term on Benefits

cazbymcazbym Member Posts: 4
Hi,

Trying to get some information / assistance for my husband's cousin.  He is aged 64 (65 July).

About 10 years ago, he bought a BSIF built end of terrace property.  At the time he was in full-time employment, and easily got a mortgage. 

Some 2 or 3 laters, an unsuccessful operation meant he was unable to work and has been on disability benefits ever since.  His mortgage payments (interest component) have been meant by benefits.

His mortgage is now coming to the end of the term originally set up.  The mortgage company have (as far as I am aware) not been willing to extend the term. 

Unfortunately, he has simply ignored the problem.  He doesn't want to lose his home, but we have racked our brains and can think of no simply way for him to avoid moving and to keep his home. 

We have looked at equity release, but these fall over once the lender knows that the property is non-standard.

The property is valued at around £160k with an outstanding mortgage of £46k.  He doesn't need a change of accommodation to cater for his disability.

Any advice would be greatly appreciated.

Many thanks

Replies

  • Debbie_ScopeDebbie_Scope Member Posts: 947 Pioneering
    Hello cazbym,

    Thank you for your post, I'm sorry to read about the difficulties your Husband's Cousin is having renewing his mortgage.

    I'm really sorry but your family member has a lot going against him in terms of securing a further mortgage.

    Firstly the property itself. BSIF houses for those who aren't familiar with the terms, are British steel framed houses, designed and produced by the British Iron and Steel Federation, and built around the country from 1946.
    Unlike other prefabricated housing BSIF houses aren't listed as defective buildings but they do still pose a risk to a lender and it can be more difficult to secure a mortgage on this type of property but not impossible. When assessing a mortgage application the two main things considered are the property itself and the borrower's income and ability to sustain the mortgage payments.

    The next problem he will encounter is affordability and an awful lot goes into assessing this. Since the financial crisis back in 2008 lending has tightened up considerably. Many mistakes were made prior to the credit crunch and a lot of people were given mortgages who couldn't realistically have ever sustained the mortgage long term, including people in receipt of benefits as their sole income. For an idea of how in depth the affordability tests are you can look at the Financial Conduct Authority's Responsible Lending and Financing Handbook which outlines the rules and regulations lenders must follow. Part of those affordability tests will look at his age and future earnings potential. Not only will the lender look at the current affordability of the mortgage, they will look for the future sustainability of the mortgage. They will apply various 'stress tests' designed to test the applicant's vulnerability to various stressors including a rise in interest rates or future job changes. https://www.handbook.fca.org.uk/handbook/MCOB/11/6.html
    I suspect that his age is going to be quite a big factor in this. However, having said that, some lenders will assess income up to the age of 65-75 but this will be on a case by case basis. Lenders such as National Counties Building Society offer products aimed at the retirement market. It might be worth checking with them to see if they can help with this and find a suitable product. There's certainly a fair amount of equity in the property and this could go in his favour. http://www.ncbs.co.uk/ 
    Building Societies might be better able to offer the help he needs so it's worth checking a few out. I think it would be a good idea to get a mortgage broker to help find a suitable product. You can find local advice using the website www.unbiased.co.uk.

    Another difficulty is that the help he is currently receiving from the DWP for his mortgage interest (Support for Mortgage Interest) is changing. From April 2018 SMI will change from a benefit to a loan. This means that if your husband's cousin wants to continue receiving the help, he will need to consider if he wishes to do this by way of a loan or whether he needs to make other arrangements to service his mortgage. He won't have to pay back any of the help he's received to date, it will just be from April 2018 onward. With the loan format, the loan will be repayable if/when the claimant returns to work or, if the claimant is unable to return to work, a charge can be placed on the property. If/when the property is sold in the future, the loan will be repayable upon sale. The loan will also come with interest too so there's a lot to take into consideration.

    If you add to all of this the current economic uncertainty since the EU Referendum result and the shock waves from that result, this could make it even tougher for him. We've already seen lenders take a more cautious approach and this could continue for a little while yet.

    I'm on hand if you need any further advice but I think it's important to talk to the current lender to see what options are available for him. Finding out their position will be very important. I can do further research along to the as more information comes in so please do keep in touch.

    Best wishes
    Debbie
  • cazbymcazbym Member Posts: 4
    Hello Debbie, 

    Many thanks for the information.  Much of it, as I had suspected.

    I will double check the information from the current lender. 

    In the intervening period, we had convinced him that he was likely to be forced to move - not letting him on the fact that we have been looking into this for him so as not to disappoint him should we come up wanting.

    With this in mind, we recommended that he should get the property on the market and advise the mortgage lender that he had done so, with immediate effect whilst he looked into other options. 

    He went down to a local estate agent, in an area which is filled with BSIF properties, who have promised him that they can arrange an equity mortgage for him and who specialise in these types of properties. 

    I'm of course hopeful that this works out for him, but interested to see what happens.  Whatever the outcome of this option, I will come back here and post, just in case anybody else finds themselves in the same situation.

    It does seem unfair though, that through no fault of his own, he should lose his house.  But that's the system for you, and we have to accept that it's better than most around the world. :)

    Once again, thank you very much for your advice and watch this space.

    Cazbym

  • Debbie_ScopeDebbie_Scope Member Posts: 947 Pioneering
    Thanks Cazbym, I look forward to hearing the next update :)
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