Support for mortgage interest

Client is separated. Joint mortgage. Children with her. No contact with ex so no idea whether they’re on benefit. Been told to expect the SERCO contact. How is her share established in these circumstances and what’s the loan for? The full amount of the mortgage? Her share etc.

Thoughts?

Mike, I think cases like that are a large part of why CitA and others are warning advisers to stay away from this stuff.

Your client (probably) has an equitable interest in the property as a joint tenant - meaning that both her and her ex similtaneously own the whole property.

If she takes out a charge on the property without the consent of the other joint tenant, that will be an act inconsistent with a joint tenancy and the ownerahip of the property will automatically sever. She and her ex would become tenants in common owning a share of the equity each. The charge would apply to her share only - which would be 50% by default.

Severance of a joint tenancy has serious and irreversible consequences as far as the property goes, so you would really want to refer someone in this situation to a property or family solicitor or an IFA for advice before signing anything.

I can’t see why the loan would cover anything but the normal amount of interest though.

We have had some information from DWP through our local JC+ Liaison meetings and this included a handy table on what type of charge would be sought and who would need to sign which I have pasted below in case it is of any assistance. we are also sending questions directly to one of the Policy Officers and are finding that the answers raise both issues and eyebrows!
Elliott - I am happy to email you more about this if you like

Jeremy Barker - 14 March 2018 03:53 PM

Daphne - 14 March 2018 01:35 PM

stuart - 16 January 2018 11:29 AM

Since SMI loans are not benefits, but rather a financial product, is our advice whether to accept a loan (rather than general information about the loans scheme) crossing into realms of regulated financial advice (even where a client has no real choice but to take out a loan after April), so referral for independent financial advice is a requriement?

Citizens Advice considers this to be the case in its January Benefits Update newsletter. Not sure how claimants will be able to afford to pay for the advice though….

Written answer confirms that claimants are pointed to Money Advice Service, Shelter and Citizens Advice - none of which offer regulated advice.

The written answer does not impress. It says that the organisations mentioned “can support claimants to understand the options available to them”. Explaining the options is one thing but choosing which option is appropriate is where things fall into the arena of regulated financial advice. It appears that the minister thinks that once they understand the options a person can make a decision without assistance. That will often not be the case.

Isn’t it Serco’s role to help claimants understand the available options?

Some CABx may be able to give access to pro bono unregulated financial advice through Money Plan, but I think that would only be generic guidance.

Is it any wonder that only 11% of those contacted by Serco have taken up the loan?

A huge debt problem is building up here when the mortgage lenders start to send out recovery notices to the 89%  in around June this year, look out for the fall out

It will be interesting to see if the 11% figure just represents people leaving it until later to make a decision or if people really will be spooked and decide not to take the loan. Whilst I am not planning on straying into regulated financial advice with clients it would seem odd to me if the vast majority of people did not take up the loan given the price of credit elsewhere. The only situations I can really see where someone might not take it up is where a family member expects to inherit the property in future and decides that it is best to pay the mortgage themselves in order to protect the inheritance or where there isn’t much mortgage to pay and it makes financial sense to clear it and have done with. I think the government was looking for a way to reduce (net) expenditure on this whilst looking after those who need the governments support the most, the banks. If they end up with a load of benefit claimants who can’t pay their mortgages then it will have gone badly wrong.

We have leaseholders who have paid off their mortgage but were getting help through SMI for eligible service charges. I’m assuming they will be offered the loan too?

JoW - 15 March 2018 04:25 PM

We have leaseholders who have paid off their mortgage but were getting help through SMI for eligible service charges. I’m assuming they will be offered the loan too?

Not as far as I am aware - if they’ve taken a loan to pay service charges, they would be under the loan scheme but as far as I know, “normal” service charges should continue.

House of Commons library briefing on SMI reviews the current scheme rules and the replacement loan scheme.

just had a very astute client, age 81 with no dependents who has the serco letter but asks if he can pay the interest that the dwp are charging separately to dwp or serco rather than have it build up until he dies or sells the house, interesting question , I told him very unlikely as there will be no payment due until the house is sold in the future but the client asked me what bit of the regulations this information is based on. >>>>>>>>>>>>>any ideas ???

SocSec - 19 March 2018 01:09 PM

just had a very astute client, age 81 with no dependents who has the serco letter but asks if he can pay the interest that the dwp are charging separately to dwp or serco rather than have it build up until he dies or sells the house, interesting question , I told him very unlikely as there will be no payment due until the house is sold in the future but the client asked me what bit of the regulations this information is based on. >>>>>>>>>>>>>any ideas ???

Reg.15 applies.

15.—(1) The Secretary of State shall charge interest on the sum of the loan payments until the earlier of—

(b)the event referred to in regulation 16(1)(c).

http://www.legislation.gov.uk/uksi/2017/725/regulation/15/made

SocSec - 19 March 2018 01:09 PM

jasks if he can pay the interest that the dwp are charging separately to dwp or serco rather than have it build up until he dies or sells the house

You can pay money off the loan with a minimum amount of £100

Paul_Treloar_AgeUK - 15 March 2018 04:56 PM

JoW - 15 March 2018 04:25 PM

We have leaseholders who have paid off their mortgage but were getting help through SMI for eligible service charges. I’m assuming they will be offered the loan too?

Not as far as I am aware - if they’ve taken a loan to pay service charges, they would be under the loan scheme but as far as I know, “normal” service charges should continue.

So they can still get SMI as a benefit for the service charge whether or not they have a mortgage too? So the loan would help with interest on the loan and SMI would continue for the service charge?

JoW - 22 March 2018 12:17 PM

So they can still get SMI as a benefit for the service charge whether or not they have a mortgage too? So the loan would help with interest on the loan and SMI would continue for the service charge?

As far as I can see, yes.