I retired last 12 months and have my pension and retirement credit. The agencies have offered assistance to help me with my interest only mortgage, but no one I’ve asked could tell me how it works.
I’m kind of a mortgage prisoner and my interest rate is already 9.75%. If the federal government pays for it but additionally provides additional curiosity, I don’t have a lot of integrity if I’ve marketed my house because the mortgage expires in about 4 years.
There is no information on whether I can stop the federal government assistance and pay what I have borrowed once I advertise the house, or if I have to start paying again once I stop the assistance. You will have trouble paying that and the mortgage by relying on the interest rate.
Any advice you could give me would be greatly appreciated.
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Pensioner Help: Will a DWP loan just add to the 9.75% interest I’m already paying on my mortgage? (inventory image)
Steve Webb replies: I am sorry that you, as a ‘mortgage prisoner’, could have encountered such excessive curiosity.
For the purposes of this answer, I’m assuming you’ve already explored the various choices that might be available to those who end up this way.
As the profit system is concerned, you might be right as someone with low retirement prospects, you will be entitled to help with the mortgage curiosity deduction. However, help is extremely limited for reasons I’ll explain.
If you retired early and had a mortgage, you may also have to pay mortgage interest funds (up to certain limits) along with your earnings.
However, the federal government has removed this support and replaced it with a repayable loan system.
The system is named ‘mortgage rate support’ and more on gov.uk.
It works for the federal government to encourage your mortgage curiosity prices when you have a secure profit.
For those with retirement credit, help is offered as soon as you submit your utility, but for those on working age benefits, there may also be a 3 to 9 month “waiting period” to receive benefits earlier than you can get help.
Did you miss out on AOW benefits when you were widowed?
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He wants to help people get the cash that’s rightfully theirs and find out if there’s a systemic flaw that hasn’t been identified in the authorities’ massive correctional train aimed at underpaid older girls.
Find out when you too could be affected and the right way to contact Steve right here.
> Will you miss out on AOW when you are widowed at retirement?
The Department for Work and Pensions will then make a contribution to your mortgage, which it will pay to your lender.
However, there are two main differences between the amount you actually pay and the amount they are willing to cover.
First, they only pay on a primary mortgage of £200,000 for people of working age and only on a primary of £100,000 for those like you with pensionable credit.
This means that if your mortgage stability exceeds £100,000, curiosity about the extra quantity will not be eliminated.
Second, the DWP pays interest at a normal fee, regardless of the interest rate you currently pay.
The gov.uk website says this charge is currently 2.65 per cent, although this subject may vary. After all, it’s only a fraction of the speed you’re currently paying for.
These DWP funds are exposed to your lender and so they monitor how much they paid. In addition, they pay you curiosity for the amount they paid on your behalf, and the interest rate they pay is currently 3.03%.
Ultimately, when the property is sold or changes possession, the DWP must repay the total amount of the mortgage and interest.
Your original mortgage lender has ‘first lien’ on the proceeds of your sale, however the DWP then takes their share of the remainder.
Compared to the previous funds system for securing a mortgage curiosity, it is a much less favorable system, especially as any funds the DWP provides you must be repaid with curiosity.
However, if your funds are extremely tight and you might struggle to meet your monthly funds, these DWP fractional funds can make you profitable in a short period of time.
Ask Steve Webb a retirement query
Former pensions secretary Steve Webb is ‘It’s a money-grubbing uncle’.
He can answer your questions, whether you’re still saving, retiring, or juggling your retirement savings.
Steve left the Department for Work and Pensions after the May 2015 election. He is now an associate at the actuarial and consulting agency Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him (email protected).
Steve will do his best to respond to your message in the next column, but he won’t be able to reply to everyone or correspond privately with readers. Nothing in his solutions can be considered regulated monetary advice. Posted questions are usually edited for brevity or various reasons.
Please include a daytime phone number in your message – this may be kept confidential and not used for promotional purposes.
If Steve can’t answer your question, you can also contact MoneyHelper, a government-backed group that provides free help to the general public. It will be revealed here and quantity is 0800 011 3797.
SteveGet a lot of questions about AOW predictions and COPE, the contractual equivalent of pensions. If you write to Steve on this topic, he tackles a typical reader question about COPE and the State Pension here.