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Support for mortgage interest

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Barbara Knight
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Leorn Welfare Rights Training Services, Derby

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Hi does anyone know what will happen if someone signs a deferred payment agreement to pay for care or already has a second mortgage? Who will get priority when the house is sold and how will anyone be able to work out if the equity can cover the different debts? This is going to be madness for the 76,500 pensioners with SMI.

     
Gareth Morgan
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Barbara Knight - 26 June 2017 03:45 PM

Hi does anyone know what will happen ....

No; really.

     
Andrew Dutton
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Derbyshire Welfare Rights Service

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Am I right in thinking that although the power to make Regulations about this has been activated (so to speak) the Regs themselves have not been made? Given Brexit, DUP deals and other matters, is it remotely realistic that Regs will be made (I mean properly) and a system put in to place on time?

Gareth may respond very much as he did to the last query - ?

     
stuart
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New regulations out today providing for loans instead of support for mortgage interest… Loans for Mortgage Interest Regulations 2017 (SI.No.725/2017)

      [ Edited: 8 Jul 2017 at 06:43 pm by stuart ]
Paul_Treloar_AgeUK
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Information and Advice Resources, Age UK

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This just popped into my inbox with attached documents.

Dear partner,

As you may be aware, the Department for Work and Pensions (DWP) currently offers a benefit called Support for Mortgage Interest (SMI). It is also known as Help with Housing Costs. SMI pays towards the interest on a mortgage and other eligible home improvement loans. SMI is offered to claimants who receive income-based benefits and are either of pension age or out of work.

The Government announced in the 2015 Summer Budget that SMI would be changed from a benefit to a loan. This loan may be secured by a second charge on the claimant’s property.

On 5 April 2018, SMI benefit will end. This means that from 6 April 2018, claimants need to ensure the interest on their mortgage and home improvement loans is paid. Claimants can accept the offer of SMI loan payments from DWP. This is entirely voluntary. The SMI loan would need to be repaid – plus interest – once their property has been sold or its ownership transferred.

Choosing to receive an SMI loan is one of the ways claimants might wish to ensure the interest on their mortgage and home improvement loans is paid. However, the SMI loan will not replace SMI benefit automatically, as claimants will need to complete and return loan documents first.

Claimants may want to seek help and support on how the charge on their property might affect them and their household in the future. We have created a summary of the changes to SMI specifically for organisations like yours, which you can find attached to this email in both English and Welsh. We have also updated the GOV.UK pages on SMI, which you can find at https://www.gov.uk/support-for-mortgage-interest

Kind regards,

     

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Andrew Dutton
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Interesting that the gov.uk link says that people will get a letter in February 2018 telling them about the change - somewhat later than the original planned date of June this year, and bound to cause a few problems, being right on top of the date of change - how will people get advice in time???

Still nothing on the ‘independent provider’...?

     
Paul_Treloar_AgeUK
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Say they will get letter “by February 2018” - I understand that letters will start going to those affected very shortly.

They have appointed Serco to call claimants, see bottom of page 4.

     
Andrew Dutton
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Ta, I’m obviously not concentrating today…

     
stuart
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Secondary legislation scrutiny committee has reminded DWP that it needs to offer face to face explanations of loan payments and the acceptance process as well as telephone / online contact with SERCO.

https://publications.parliament.uk/pa/ld201719/ldselect/ldsecleg/14/1405.htm

     
Oldestrocker
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I can foresee that the recovering of this ‘debt’ will be a nightmare for some. Once again the government are approaching the issue with a ‘one size fits all’ mentality.

I have clients (husband and wife of over 40 years) who currently receive GPC + housing costs.

The property bought in 2000 solely by the wife for £245,000 was funded in part by a loan from a Discretionary Trust of £145,000 of which she is one of the beneficiaries along with their children (her husband settled the Trust in 1995) and an interest only mortgage of £100,000.
His wife has maintained the interest payments to the bank out of her own resources over the past 17 years. The loan from the DT has interest rolling up at the rate of 8% compound. The current balance owed to the DT is £543,000, to the bank £100,000 and the current value of the property is £600,000.
The DT will shortly advance a further £100,000 to settle the mortgage with the bank.

The husband has no legal right to the house or it’s value and in fact lives with his wife as a ‘lodger’!

Eventually when and if the house is sold the entire proceeds will find their way back into the DT for the benefit of their children, thereby avoiding care home fees etc and any Inheritance Tax issues.

I presume that the DWP will seek to have the husband sign the loan agreement even though he is not a party to the mortgage nor does he appear on any of the documents at Land Registry. Logically the husband should refuse to sign the agreement as he has no power to enter into any agreement that affects the property.

Fun and games to be had!!

      [ Edited: 20 Jul 2017 at 03:53 pm by Oldestrocker ]
Paul_Treloar_AgeUK
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More information on the schedule for contacting people affected from DWP.

The information on the schedule of calls from Serco is as follows:

Contact will primarily be based on benefit type: Pension Credit (Jul 2017), ESA (October 2017), IS and JSA (January/February 2018). Within this there will be overlap, e.g. we will speak to Pension Credit customers in December if that is when they become eligible to SMI, but the majority will be contacted in these time periods.

For Pension Credit, there is an alphabetical approach (A-Z), for working age (ESA, IS, JSA) a decision has yet to be confirmed.

There are also some trigger points for certain groupings: Partner, Welsh, Northern Ireland (all September 2017) and Vulnerable (October 2017). We will not contact vulnerable claimants directly, this will be done via appointee or equivalent. Scottish cases will commence from the date Scottish Loan Agreement / Charge form versions are available.

The first letters were issued to 500 claimants in England on 19th July, claimants can book informed discussions from 24th July and the first telephone calls will be made 27th July.

Once first contacted, via the warm up letter & booklet, the claimant will be rung by the Information Provider between 5 and 15 working days. This is to give the claimant time to study the literature and think about any questions etc.

There will be 5 call attempts made during this period and if these fail then DWP will look at why there was no contact and re-refer the case for further call attempts where appropriate. The claimant can also request a follow-up discussion if they wish.

If the claimant does not submit loan agreements after saying they want the loan then they will be contacted after 6 weeks and sent a reminder. There will be follow up correspondence after this. There is no restriction on the claimant changing their mind about taking up or declining the loan at any point, either before or after go live. 

     
Daphne
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Latest versions of the ‘warm-up letter’ and information booklet are attached - received via an email from stakeholders group

      [ Edited: 18 Aug 2017 at 12:35 pm by Daphne ]

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tarzier
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The Regard Partnership, Kingston

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So this effects everyone who currently receives SMI, this will change into a loan from 06/04/18?  I take it this even includes those who receive SMI but live in a part rent/part buy property? Jules

     
Oldestrocker
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I can understand that if SMI, as a loan and the interest charged on it, was restricted to any increase in equitable value in the home. However to have a situation where the equity already built up being used to cover the loan and interest is wrong.

Given that the interest will be charged on a compound basis it will only seek to remove equity already built up being eventually handed to the government - not all that different than a form of equity release.

In some cases where equity is non existent from a growth point of view , the loan + interest can only come from whatever deposit was paid to help buy the property in the first place.

It will be of no surprise to me to see that in the future JSA or ESA awards + interest will become repayable when the claimant returns to work on the same basis as Student Loans with a much lower threshold level.

What about GPC? Should this be recoverable out of the estate when they die?

     
nevip
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Oldestrocker - 19 August 2017 11:01 AM

I can understand that if SMI, as a loan and the interest charged on it, was restricted to any increase in equitable value in the home. However to have a situation where the equity already built up being used to cover the loan and interest is wrong.

Given that the interest will be charged on a compound basis it will only seek to remove equity already built up being eventually handed to the government - not all that different than a form of equity release.

In some cases where equity is non existent from a growth point of view , the loan + interest can only come from whatever deposit was paid to help buy the property in the first place.

It will be of no surprise to me to see that in the future JSA or ESA awards + interest will become repayable when the claimant returns to work on the same basis as Student Loans with a much lower threshold level.

What about GPC? Should this be recoverable out of the estate when they die?


You raise some interesting points.  You mentioned in your previous post the possibility of the DWP requesting the non legal owner sign the loan agreement.  Pointless of course, if he is not the GPC claimant nor having any legal title to the property.  As for recovery, what will happen if the DWP fails to register its legal title?  Or earlier registered interests eat up the bulk of the value of the property?  I can also see the possibility of a market for property lawyers looking for ways to put properties beyond the reach of the DWP once the current legal owner’s title gets transferred.