News - Mortgage queries
Pat Bunton of London & Country Mortgages answers your questions on mortgages.
Five years ago I was a reckless student gaining a student loan, massive credit card bills and a threatened CCJ over a higher purchase agreement. These debts are now paid off in full and as I am earning well over 20,000 a year I am considering a mortgage on my first property. I am worried that my past financial indiscretions may have sufficient effect on my credit rating to affect any mortgage offers. Is this likely to be, and if so how would I go about improving my rating? (PS, I have not had a thretening letter from the bank for over four years).
The scenario painted here is not at all unusual and most lenders now have got used to the idea that many students rack up considerable debt whilst at university. The good news here is that it doesn’t sound as if court action was taken against Stephen and the fact that he has since found a good job and cleared his debts in full will make him look like a good risk to prospective lenders. The fact that Stephen has also maintained his financial affairs well for more than four years will also provide lenders with extra comfort so I really do not see why he would struggle to obtain a mortgage.
Please can you help? My son is a first-time buyer. The mortgage he is able to raise from salary is not enough to purchase a property. I have been advised that I can help by raising a small mortgage on my own property(at present unmortgaged). He would then pay me each month in order that I can pay the building society on an interest only basis. Any capital on this mortgage and the other one to be repaid when he sells. I have now read that by doing this I may be liable to pay income tax on the payments he makes to me, although I am making no gain. Is this correct and if so, is there any other way of helping? I would rather not act as guarantor.
The simple answer is that the Inland Revenue want to apply income tax to income, or profit and not to neutral or loss leading situations. Therefore as long as your son’s payments are simply covering the interest charges you incur there should be no income tax liability. The most important thing here is to keep records of the interest charged and payments made so that in the event of any future enquiry you can clearly show that there was no profit for you. Also make sure that you get a formal loan agreement drawn up between you and your son at outset so that there can be no arguments or later on.
My partner and I are first-time buyers and have had an offer accepted and a mortgage approved etc. We have since found out the vendor does not have the deeds as they are lost (the property is his grandmother’s house, who has now passed away). Our solicitor said it shouldn’t be a problem, but I believe it is terribly risky and we could have a problem selling in the future. This seem to be very “dodgy” advice. Can you please let me know the best way to go on?
This is not an unusual situation and your solicitor’s advice seems sound. If a lender releases the deeds to a property when the mortgage is repaid it is surprisingly easy for the owner to lose them.
If, however, the title is registered the solicitor only needs to obtain an official copy of the Register from HM Land Registry. These days the Land Registry only issues Official Copies as evidence of ownership.
If the title is not registered then the seller’s solicitors should simply be asked to make an application to the Land Registry to voluntarily register the title. Once Land Registry have done that it should again be perfectly safe to proceed.
I am confident I have a valid complaint about a mis-sold endowment mortgage package and would like to complain and seek uk travel insurance elderly but really have no idea how to start and indeed what to say in my first letter to the company. Can anyone advise on what I must do or indeed do you know of any websites that have “template” letters available that can be edited?
The first thing you need to do is to put your complaint in writing to the firm that sold you the endowment, they will then have to formally respond to it and if you are unhappy with their subsequent response you have the right (at no cost to you) to have the matter referred to the Financial Ombudsman Service.
It is important to bear in mind that poor performance alone does not constitute mis-selling, as no one can guarantee how endowments will perform in the future. But if you were told that it would definitely pay off your mortgage, or weren’t warned the returns were not guaranteed then you probably have good grounds for a mis-selling complaint. As such your complaint letter should major on what you were told when you bought the contract, rather then simply focussing on its performance.
In 1996 my wife and I took out a criticall illness policy with our mortgage, at the time my wife was seeing a local doctor for an ear infection. In November 2004 my wife was diagnosed with MS, so we decide to claim on this policy. However last week we telephoned the Norwich Union, who the policies are with, and after three days received a letter saying that we could not claim on the policies. We were told this was because we had not disclosed certain information down at the time, that are policies were now void and that all monies paid on the polices were being paid back to us. All the policies were done through an independent financial advisor (IFS services of Stroud) who told us that because my wife was only going to see the local doctor that we did not have to disclose that information. Does Norwich Union have a right to cancel these policies and where do we stand?
This may seem very harsh at first sight, but all insurers offering this type of policy rely on customers making full medical disclosures at the outset. The argument being that non- disclosure of any medical history affects their decision on whether or not to offer cover, though how an ear infection has become linked with MS is beyond me. No adviser should ever tell you to omit medical information and if that was the case you should definitely make a formal complaint to his or her firm.
I would also suggest telling Norwich Union that you are not happy with the way that they have handled your claim and ask that they also treat it as a formal complaint. If as a result of these two actions you do not get a satisfactory response ask for the matter to be referred to the Ombudsman for Adjudication.
I am one of the many first-time buyers in the UK that has been struggling to get on the property ladder. It’s pretty well reported now that Gordon Brown’s increase on the stamp duty threshold from 60,000 to 120,000 is not enough. It will not make buying a home affordable for first-time buyers as it would be difficult to find a property for under 120,000.
However, I do have a slight twist on this situation, which maybe you can clarify for me and many others. I am lucky enough to be in the process of buying an affordable home on a “shared ownership” basis. I will be buying 50% of a property worth 220, 000 so I will own a 110,000 stake in the property. Can you possibly confirm where I stand? Do I have to pay stamp duty or not? My stake in the property is under the threshold after all. It would be very strange that the government is attempting to make it more affordable for first- time buyers by reducing the stamp duty, but excluding people that can only ever buy a property in their locality by entering into one of these “affordable” shared ownership properties.
This is a really interesting question and the answer is not a simple yes, or no - not at all unusual when the Inland Revenue are involved. There are two options open to you. Firstly, linking the amount of any stamp duty payable to the amount your are paying for your share of the property, plus an additional amount that is linked to the rent that you will be paying to the Housing Association.
The amount payable that is linked to the rent depends on the length of the leas, but as a rough guide if the average annual rent is over 600 then the 0% stamp duty band does not apply. This means that stamp duty would be payable on the amount of the price being paid plus an allowance based upon the rent. The Inland Revenue work out the exact amount payable by applying a formula that is buried inside a calculator on the Stamp Office web site.
If you subsequently increaser the share of the property you own then further stamp duty mighty be payable, depending on prevailing taxation rules ta that time.
Secondly, as an alternative, you can elect to pay stamp duty once, now, based on the current market value of the whole property - in this case at 1%. So if you are thinking about buying a greater share of the property in the future then this may well be the best option.
My advice is to talk it through with your solicitor, bearing in mind that their advice will only be based upon current Inland Revenue rules.
I am currently undergoing a re-mortgage. Taking my husband off the mortgage and adding my partner to it. There has been some talk of my partner having to pay stamp duty of 1% of the new mortgage. This seems to be a grey area at the moment.
There is no stamp duty to pay where a change of name is part of a settlement, so you can take over the mortgage and ownership of the property from your e- husband with no stamp duty liability. If however you then add your new partner to the mortgage, then that is a separate transaction and would be deemed to be them buying a share of the property. Depending on the amounts involved and the size of any mortgage you have that might trigger a stamp duty charge. In the simplest terms stamp duty would normally be payable if half of the current mortgage totals 120,000 or more - as with the previous stamp duty question, take advice from your solicitor
What is you view of the next move in interest rates, as I need to decide whether to take out a variable or two year fixed rate mortgage.
This really is the $1m question, the Bank of England base rate currently stands at 4.75% and the best two year fixed rate is 4.49% with the Newcastle Building Society. On that basis alone the fixed mortgage looks great value. The best 2 year variable rate is 4.45% with Leek United (Building Society, not football club!) so the difference between this and the fix is marginal.
If you are worrying about this, then it would tend to suggest that the security of a fixed mortgage makes sense. Equally economists are split about where rates might be going, although in the last week or so the fears of a further rise seem to be diminishing. The best summary I can give is that interest rates are unlikely to go very far in either direction - so against that backdrop the certainty of a fix at or below the current Bank of England base rate looks very attractive indeed.
We had a mortgage untill September 2004. Amber then sold it to Future Mortgages (same address). We are now in the middle of moving house and have been told that the mortgage that was portable with Amber is no longer portable. We have had to change providers to buy the new property and have to pay 3% redemption on the old one which is no fault of our own. Can you please advise?
This type of selling on of mortgages from one lender to another is quite common today, however the terms and conditions of the offer that you signed up for should not change. As such a like for like ‘port’ from one property to another should be ok. But if there was for example an issue with the new property type, your financial circumstances now, or for example an increase in borrowing, there could be an issue.
Certain lenders like these and other non High Street brands (like GMAC) often sell on mortgage assets, however, the big High Street Banks and Building Societies don’t tend to. I guess this is another and relatively new factor that needs to be considered when choosing a mortgage lender in the first place.
I last saw my solicitor 35 years ago and he still has my deeds,
how do I find him?
If you are trying to trace a solicitor I would suggest that the best starting point would be the Law Society. Given the timescale it is quite possible that the solicitor you dealt with has retired and it may even be that the firm he or she worked for has been swallowed up by another - the Law Society should be able to point you in the right direction.
If you can’t locate the solicitor then you should contact a new one, explain the issue to them and start the process of registering title via Land Registry as otherwise it will only be an issue you will have to deal with at the point that you decide to sell your property.
I am a student at Nottingham Trent University, looking into accommodation for next year. I was wondering if it is possible to secure a mortgage in my name with my parents as guarantors, or would it have to be in their names?
It is entirely possible as long as your parents have sufficient income to cover not only their own mortgage, but also any new one. More and more people are doing exactly this during their student years and as long a mum and dad are able, happy and willing it can work well. Though it must be said a lot of the reason it has been so attractive in the past has been because property price inflation has been huge and so it has effectively doubled up as a good investment for mum and dad as well. I guess a word of caution here is don’t just bank on huge property inflation going forwards, but make sure all of the numbers add up.
We were recently presented with a 25 charge for not taking the lenders insurance. We just said we’re not paying that and Nationwide said oh, ok then. So we didn’t pay it. Any comments?
This is a common charge levied by most lenders when the borrower says that they want to take insurance from someone other than them. Ostensibly the charge is to cover their administration costs in checking that the policy you are arranging is adequate to protect them as the lender and your approach to Nationwide obviously worked.
The opinions expressed are Pat’s, not the programme’s. The answers are not intended to be definitive and should be used for guidance only. Always seek advice for your own particular situation.