Advantages of a ‘Tenant’s in Common’ Mortgage

Here at Prestige Tax and Trust Services, we are constantly working to ensure that in case the worst happens, you and your family’s financial assets are protected from the many pitfalls that can appear from recovering from the loss of a loved one. If you’ve taken the time to have a read of our website, and you’ve read our ‘Cost of Care’ page, you’ll have learned that when it comes to financing a loved one’s care prior to their death, it can have a serious toll on your savings and assets, as costs build. If you’re not careful moving into a care home can wipe out your savings, and as a person is automatically means tested on moving into the home, unless you have very few assets, you will not avoid the cost of care.

One of the assets taken into account is the property you own. Due to the often high cost of care, if you are in a relationship and own property together, it is vital you safeguard your home from the after effects of bank rolling the care received by a loved one. Most people simply own their homes jointly in what is known as ‘Beneficial Joint Tenancy’. In its simplest terms, this type of mortgage means that the property belongs to you and the other owner’s jointly and in the case of any major decision; re-mortgage, sale etc., it has to be jointly agreed upon, you have to act as one. When one of the owners passes away, ownership simply passes onto the remaining owners.
This is where your home becomes vulnerable to the cost of care. This is because, as your loved one passes away, their care bill becomes yours to take care of, and as the property becomes 100% yours, it means it is vulnerable to care homes looking to you to foot the bill.

However there is another type of mortgage known as ‘Tenant’s In Common’. This works in a different way. A ‘Tenant’s In Common’ mortgage still means that you own the home jointly. However, you also own a specific share of its value. You can do whatever you want with your individual share. Once you pass away, your share simply passes on to the beneficiary named in your will. This means that when you enter care, and you undergo a means assessment, only your shares in the home you own will be part of said assessment. It works on a twofold level. Firstly, it means that your financial circumstances are more likely to be realistically reflected in your assessment, leading to a more accurate summation of the financial aid you are entitled to. Secondly, it means that your partner’s shares in the home don’t go towards paying off the care bill.

At the end of the day, it isn’t fair for you to have to pay an exorbitant amount to pay off care bills and you shouldn’t have to put your home at risk to do so. A ‘Tenant’s in Common’ mortgage goes a long way to ensuring this doesn’t happen.

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