Mortgages Q&A

Q. Should I switch my mortgage?

Answer.

I have been with the same bank for over 20 years and my mortgage deal is shortly up. Is it worth switching my mortgage to another lender, or is it wise to stick with my current bank?

Our mortgage specialist replies: Switching your mortgage can depend on a lot of factors, but it is best to shop around and see if you can get a better deal elsewhere. Before you do anything, tell your mortgage provider that you are thinking of moving your mortgage and see if they can offer you a better or improved deal. Then take your time to digest the facts and contact other banks and building societies to if they can improve on the deal. Too many people stay loyal to banks for no other reason than they have had an account or mortgage with them for a large number of years. Look around and see how much you can save from other lenders.

Q. Do we have to pay capital gains tax?

Answer.

My husband and I recently bought a house which our son now rents from us. He is hoping to buy it in two years time. Will we be liable to pay capital gains tax if the house price has risen?

Our tax expert says: This really depends on the increase in the property´s value, but there is likely to be some capital gains tax liability. You have to pay Capital Gains Tax when you sell, give away, exchange or otherwise dispose of an asset or part of an asset. If your property is worth more than when you paid for it you will normally have a chargeable gain, but you can deduct some of the costs of buying, selling and improving your property from the profit. Speak to a solicitor who will explains the ins and outs of capital gains tax for your situation, although there is a single rate of 18% capital gains tax for individuals.

Q. Should I switch my mortgage?

Answer.

I have been with the same bank for over 20 years and my mortgage deal is shortly up. Is it worth switching my mortgage to another lender, or is it wise to stick with my current bank?

Our mortgage specialist replies: Switching your mortgage can depend on a lot of factors, but it is best to shop around and see if you can get a better deal elsewhere. Before you do anything, tell your mortgage provider that you are thinking of moving your mortgage and see if they can offer you a better or improved deal. Then take your time to digest the facts and contact other banks and building societies to if they can improve on the deal. Too many people stay loyal to banks for no other reason than they have had an account or mortgage with them for a large number of years. Look around and see how much you can save from other lenders.

Q. Can a house swap work for us?

Answer.

We want to sell our house and buy a smaller property, but are having trouble finding a buyer.  My daughter and her boyfriend want to buy their first home, so if they buy a smaller property is it legal for us to trade houses between us until I find a buyer for my house? We would continue to pay the council tax and mortgage and they will do the same on their new home.

Julie Burns, Lancashire

Our money expert replies: This seems like a sensible arrangement, buy it wouldn´t have any legal standing, and it would contravene the terms of any outstanding mortgage payments on either property. When a residential mortgage is agreed between the creditor and the client, it is on an ´owner-occupier´ basis, and the legal expectation is that the mortgage owner is in full time occupation of the property (except during holidays). Any change to that contract would have to be agreed by the lender. Buildings or contents insurance policies in place could also be affected as insurance premiums are dependent on a range of key factors, including the age of the occupants. In other words, yes it can be done, but make sure agreement is made between the mortgage providers and the insurance providers, and seek legal advice to make sure everything is above board before you proceed.

Q. Am I right to stay loyal to my bank?

Answer.

I have had an account with the same high street bank for 20 years. I have a mortgage with them and I pay all my direct debits and standing orders through them, but am becoming increasingly irritated by their attitude. I was recently made redundant and tried to arrange for reduced mortgage payments, which would ease my current situation. They didn´t want to know and instead, threatened me with legal action if the payments are not made on time. If I can find a better mortgage deal elsewhere, should I take it up, or stay loyal to my bank?

Our finance expert says:  Staying loyal to one bank can be a waste of time. Consider how loyal your bank has been to you, and how much they have helped you over the past 20 years when your finances have taken a dive? Misguided loyalty can leave you with more financial problems than you started with and if your bank is not willing to help you with your current mortgage payments, shop around for a cheaper deal elsewhere. If you are suffering debt problems which your bank are not willing to help you resolve, speak to a regulated debt counsellor who can give you free advice and guidance, and who may be able to arrange reduced payments with your lenders.

Q. Is it possible to find a cheaper mortgage deal?

Answer.

My husband and I bought our first house for £260,000 on a fixed mortgage deal which ends in June, 2010. We still owe £200,000 so is it worth changing mortgage providers for a better deal?

Janet Stenmore, Cardiff

Our money expert replies: A new lender would definitely want an up-to-date valuation on your house, which, considering recent market trends, could be lower than it was two years ago. You may need to borrow up to 80% of the value of your house, and although a standard variable rate with another lender is an option, few lenders are willing to offer them to new customers at the moment. Talk to your current lenders, and see if they can offer you any special deals. If not, consider a move to a standard variable rate, so you don´t have to pay any fees. Also make sure that any new deal allows you to make overpayments if and when you can without penalty.

Q. Is it worth getting rid of my fixed-rate mortgage?

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I have a mortgage fixed until March 2012. Would it pay for me to come out of the fixed rate mortgage, bearing in mind the redemption fee is over £2,500?

David Strong, Macclesfield

It really depends on the figures, and how much you actually owe, but to achieve a saving you must find a deal that covers the early redemption fee, plus the costs of remortgaging. In order to do this you will probably have to reduce your repayments, depending on the size of the mortgage arrangement fee, to make any kind of saving. The type of deal you are offered will depend on the value of your home and whether your personal risk rating is taken into account. Speak to a mortgage broker for more advice, but it may not be worth the hassle of changing the mortgage at this stage.

Q. Can it be tricky owning half a house?

Answer.

I own half a house with my father and have just bought a second home on my own for him to live in. Is it possible to transfer joint ownership from the current property to the new one, and if so, what are the implications of stamp duty?

Fiona White, Southampton

Our money expert replies: The answer is not as straightforward as you may imagine. Stamp duty becomes payable at £175,000 and the consideration takes into account the value of the share being transferred, and the value of the assumption of any debt such as a mortgage. You need to know the value of both properties and how much the mortgages are on each. Each transaction will need to be looked at separately, depending on how much you and your father have put in. A declaration of trust needs to be drawn up to put this into effect, and to show how and when the house can be sold. The mortgage lender would also have to give consent to carry out a ´transfer of equity´ transaction, as the mortgage would need to be in joint names to reflect the joint ownership of the title.

Q. Should I sell my property or rent it out?

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My house is valued at £250,000 with an £80,000 mortgage. Is it better to sell the house and invest the £170,000 capital or rent it out for around £1,000 a month?

Mike Jewell, Cambridge

Our finance expert replies: The prospect of capital growth over the next few years is questionable, but if you are happy with the money you have made since you bought the house, now may be a good time to cash in. Alternatively, you could achieve a better capital growth over the medium to long term, as historically it has been proven that equities will out-perform other asset classes, including property over the long term. It all depends on your other assets, your attitude to risk and your personal and financial objectives, as to the best investment plan for you. You would also need to consider the capital gains tax implications if you plan to sell the property.

Q. Is equity release a safe option for unmarried couples?

Answer.

Will my partner be protected if I die after signing up for an equity release scheme? We are not married but have been together 15 years and my name only is on the deeds.

Jodie Bennett, Rochdale

Our financial expert replies:  To ensure your partner will be able to continue living in the property after your death, you need to add him to the deeds of the property, and the equity release lifetime mortgage needs to be taken out in both names. If you only want your partner to have a certain share of your property on the deeds now, you need to seek legal advice to discover the best way of doing this.

Q. Do I have to have an Energy Performance Certificate?

Answer.

My father is in a care home and the tenants who have been renting her house are due to move out. Do I need to get an Energy Performance Certificate to show to new tenants?

Barry Fariston, Sheffield

Our money expert advises: Energy performance certificates (EPCs) were introduced for residential lettings in October, 2008, and tenants require a certificate by law. New tenants will not be able to move into the property unless it has an EPC, which must be issued by a qualified accredited Domestic Energy Assessor. The penalty for letting a property without an EPC is £200 for each breach. An EPC must be available to show prospective tenants when they are looking round the property and to tenants who move in.  An EPC is valid for ten years and provides A to G ratings, with A being the most energy efficient and G being the least. You can expect to pay between £100 and £200 for an EPC, depending on the size of your home.

Q. Can we be forced to sell up?

Answer.

I own a property with my boyfriend. Before we met, his business ceased trading and he has now had a letter about a £5,000 debt from the business. The creditors intend to go to court and apply for a charging order to be put on our home. If this is granted they want to force a sale to recover their money. Can they do this as I own half the house and had nothing to do with the debt?

Millie Sissons, Hampshire

Our financial advisor replies: Firstly you need to check whether your boyfriend actually owes this money. Does the creditor have a judgement against him personally for the debt or is the judgement against the company? If it is against him personally, your boyfriend could appeal or apply to have it set aside. It would be very difficult for the creditor to apply for a charging order if there is no judgement, and he may be able to negotiate with the creditor to come to a settlement, to avoid a court case. If a charging order is put on the property, it will only be put on your boyfriend´s half of the house, not on yours. The judge would consider many factors before ordering a sale of the house, so it may be in your boyfriend´s interests to make an offer of repayment to his creditors before the matter goes any further. The house could be ordered to be sold, and the debt taken from your boyfriend´s part of the sale, but you should be able to avoid this by contacting your creditors to make an offer of payment.

Q. Is it best to save my money or invest in property?

Answer.

If I had invested £100,000 in the bank in1998, would I be better off than if I had bought property with it?

Jerry Knowles, Burton on Trent

Our finance expert replies: Savings can always outperform property prices and vice versa over any ten year period, but if you put £100,000 into an instant access account in March, 1998, based on an average rate payable, the money would now be worth £135,705. According to a top high street building society, a property bought for£100,000 in 1998, would be worth £250,000 by the end of 2008. Even allowing for recent drops in property prices, you would still have been much better off to invest in property ten years ago, for a higher return today.

Q. Can I hand back buy-to-let keys?

Answer.

Although I own several properties which I rent out, a couple of them are losing me money each month, and the properties as a whole don´t have a lot of equity in them. I am struggling to keep up my mortgage repayments, so what will happen if I hand back the keys on a couple of my properties and concentrate on the ones which are earning me money?

J.W Enfield

Our mortgage expert replies: Handing back the keys is often thought of as the ´easy option´ when home owners can no longer meet the monthly mortgage repayments, but if you choose to do this, you could end up being chased by debt collectors for years to come. Look at other options first, and instead of risking a black mark on your credit record, try to sell the property to another landlord or property investor who will be pleased to have a house with rent-paying tenants already installed. Also contact a local housing association who may want to buy your house. Alternatively contact a debt specialist company in the UK who can give you free debt help and advice.

Q. Whose responsibility is the repair of garden fence?

Answer.

My neighbour is pressuring me to repair the fence between our gardens, but I don´t feel it´s my responsibility. The deeds show I am responsible for the northern boundary and her deeds show she is responsible for the southern boundary. As the fence separates our properties, who is responsible for repairing it?

Jordan Smithson, Kent

Our property expert says:  Most people are surprised to find out there are not set rules for maintaining boundary fences, and it is normally sorted out between neighbours. The Land Registry may have information about who owns a boundary fence, but even though it does not state on your neighbour´s deeds that she is the owner of the fence or that it is her responsibility to repair it, you should not claim automatic responsibility. You should split the cost of the repairs, or if your neighbour disagrees, she/you will have to seek legal advice.

Q. How can I stop my home being repossessed?

Answer.

My sister owes £8,000 to her mortgage lenders, who have now started repossession proceedings. She was self employed but as the work dried up, she was unable to make the mortgage payments to the bank. Although my sister has now secured a very good job, her mortgage lenders won´t help her out of this predicament. What can she do to stop her house being repossessed?

Our money expert replies: Every lender has a legal responsibility to treat cases of financial hardship sympathetically, and to only repossess homes as a last resort. Lenders will typically assess the equity in the property and the ability of the borrower to clear the arrears. As your sister is now in a better position and is fully employed, the lender should try and work out a plan with her to repay her arrears. Approach the lender in writing, and put in a proposal of how she plans to clear the arrears. If you can help your sister with a lump sum to pay off some of the debt, this could also help persuade the lender to call off repossession proceedings. If this still fails, contact a specialist debt help company who are regulated and who may be able to speak to your creditors on your behalf.

Q. Can I get cover for a joint mortgage?

Answer.

I have a joint mortgage with a friend, made up of part mortgage and part unsecured personal loan. I want to get mortgage protection cover, but want to know if they will cover part of the mortgage if one of us is unemployed or unable to work, or whether the liability falls on the other person´s shoulders, and will my unsecured loan be covered as part of the mortgage?

Julie Wells, Walthamstow

Our money specialist answers: A payment protection insurance policy will only cover your mortgage payments, and will not take into account your personal loan. Income protection insurance will cover the mortgage and the loan, as this would be directly linked to your income. You can cover £1,500 or 50% of your gross monthly income. If both of you want to have cover, you will have to apply separately.

Q. Can we avoid going on the subsidence blacklist?

Answer.

We bought our house four years ago. The previous owners had made an insurance claim after the front porch suffered subsidence. The insurers paid for underpinning and reconstruction work. There have been no further problems with subsidence, either to the porch or the main house, but the insurers have upped the premiums to include £5,000 subsidence excess. How can I get the house declared free of subsidence without any special premiums or exclusions?

Mel Jensen, Nottingham

Our expert advisor replies: Once a property has been underpinned it will always have to be declared when purchasing insurance. If it is not mentioned and the underpinned area of the house suffers more damage in future, your insurance could be void if you fail to mention it at the time of taking insurance. Some brokers specialise in properties that have been underpinned, and you need to take specialist advice on the subject. An insurance broker will be able to speak to the insurer or underwriter about the specific circumstances and produce a suitable policy for you. You can find specialist insurance brokers using the BIBA helpline on 0870 950 1790.

Q. Do I need to get an energy performance certificate?

Answer.

I am selling my house to a member of the family. Do I need to provide an energy performance certificate?

Josh Billingham, Norfolk

Our finance specialist replies:  Firstly, home information packs don´t need to be produced for private house sales, where the property is not put on the open market. Homes sold without marketing however do need an energy performance certificate (EPC) before contracts are exchanged.  An EPC will rate your home´s energy efficiency from A to G, and include an estimate of what the rating would be and how much money the prospective buyer could save each year if recommended improvements were carried out. You are not obliged to carry out any work that is recommended, and an EPC will cost you around £100 to £200 to carry out, depending on the size of the property.

Q. Do I need to get an energy performance certificate?

Answer.

I am selling my house to a member of the family. Do I need to provide an energy performance certificate?

Josh Billingham, Norfolk

Our finance specialist replies:  Firstly, home information packs don´t need to be produced for private house sales, where the property is not put on the open market. Homes sold without marketing however do need an energy performance certificate (EPC) before contracts are exchanged.  An EPC will rate your home´s energy efficiency from A to G, and include an estimate of what the rating would be and how much money the prospective buyer could save each year if recommended improvements were carried out. You are not obliged to carry out any work that is recommended, and an EPC will cost you around £100 to £200 to carry out, depending on the size of the property.

Q. Can we avoid tax on our second home?

Answer.

I remarried three years ago, but my wife and I work at different ends of the country, so we have two homes and only live together at the weekends. Could we get a council tax discount? We live as single adults in our respective homes, so can we claim discounts in each?

Jeremy Bilson, Northumberland

Our financial expert replies: Your full council tax bill will be based on at least two adults living in one home. If only one adult lives in a house, which is their main home, the council tax is reduced by 25%. You would actually be financially better off if you were not married and did not share ownership of the properties. If you own a second home you must choose which is to be your primary place of residence. Once you have chosen your primary residence, you are eligible to claim a second home council tax discount on the other one, but this is unlikely to be more than 5%. In your case it may be worth paying full council tax on one property and claiming single occupancy on the other one on the basis that it is only occupied for work purposes. Appeals are heard by a valuation tribunal panel, whose unpaid volunteers are likely to be more sympathetic than the local council. Get advice from a solicitor or the Citizen´s Advice Bureau.

Q. How can house prices rise and fall at the same time?

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House prices were said to fall in our area last year by 0.5%, yet figures also showed a rise in the cost of the average home. How does this work?

John Evans, Watford

Our money expert replies: Some building societies last year reported strange figures of house prices rising and falling at the same time. Seasonal adjustment provides the answer to your question. Seasonal adjustments enable building societies to compare months that are traditionally busy with those that are not. When there is more activity, there is more demand in the market so prices are pushed up. Building societies often base their house price information on mortgage approvals, and on what times of the year have traditionally been strong and weak. This is then applied to the latest set of data and it is adjusted accordingly.

Q. Do deeds have to be changed after my father´s death?

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My father died recently and left everything to my mother in his will. As the house deeds are still in both of their names, will the deeds have to be changed now? There is no mortgage on the property.

J. Lewin, Basingstoke

Our money specialist replies: It really depends on the ownership of the property, but if it is owned on a ´joint tenancy basis´, this means the property would pass in full to the surviving partner. If this is the case, the house will automatically revert to your mother, but if you want the paperwork amending, you need to send a certified copy of the death certificate to the Land Registry, and they will amend their records accordingly

Q. What rights do we have as tenants?

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My neighbours and I own garages on long leases close to our homes. The landlord has said he intends to build houses on land where some of the garages currently stand. Where do we stand legally? So far he has not offered to buy any garages but he has stopped accepting our ground rent payments, and denying he has received money. We think he is trying to take back the garages without paying us any compensation. What can we do?

Joe B, Gillingham

Our expert replies:  Firstly, Your landlord cannot refuse rent and then seek repossession of property on the grounds of non-payment. Check the details of your lease and send any cheques for payment by registered post. All tenants should keep careful records of payments. To put your minds at rest,  if you are all facing the same problem, visit a solicitor together and seek legal advice. If the freeholder tries to sell the garages before demolishing them, the land is subject to the overriding interests of the occupiers, and if the leases are registered, the Land Registry would need evidence of the leases being terminated before cancelling the registrations.