Home loan

What are my options? – The Irish Times

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My mother sadly passed away in March. She had been in a nursing home for just under four years. When we initially had his house appraised, it was much less than the value we just did. Will this affect the amount we have to refund or does it honor the original assessment?

My brother is going to be staying in my mother’s house as it has been the family home for so long it would be heartbreaking to sell it so my next question is, will he have to pay back the full €106,000 within 12 months or are there alternatives?

Is the retirement home loan only relevant for the current residence or can you get one to pay off Fair Deal and then pay in installments.

Ms. JL, email

Fair Deal did its job, I suppose, in that your mother — and you, her family — had peace of mind for the nearly four years she needed nursing care.

Immediately after the death of a family member, it can be difficult to try to sort out some practical aspects of their financial affairs. Emotions are often too raw.

Therefore, in this case, the Fair Trade Agreement provides a 12-month window to process any outstanding contributions due.

In your case, the issue is somewhat complicated by the fact that your brother has decided – or all of you have decided – to move into the property.

There is nothing inherently wrong with that, but there is still an unpaid debt that must be paid. By the way, there is also the question of your mother’s will and what she decided to do with the house or any other assets in her estate, but that’s a question for another day. We’ll stick to the narrower bounds of your question here.

There are certain circumstances in which the payment of a retirement home loan may be delayed. This primarily occurs when the spouse or partner of the person who was in home nursing still lives in the property, but there are other scenarios where it may apply.

If your brother was under 21, he could apply for a deferral. Similarly, if he did not have assets of more than €36,000, he could request a reprieve. The same would apply, in this case, if a brother or sister of your mother lived there and had assets of less than €36,000. Others who may seek to delay repayment, so that they can live on the premises, include a relative in receipt of disability allowance or similar social benefit, whose income does not exceed the amount of the state contributory pension. This also applies if you receive a foreign pension but below the state pension threshold. Anyone who cared for your mother before she entered the nursing home can also apply, but only if they received social support such as care allowance.

“Person connected”

Finally, if your mother’s dwelling had been a grandmother’s apartment, the owner of the main dwelling to which it is attached could ask for reimbursement with the long finger.

Anyone other than a spouse or partner is called a “related person” – like related to your mother. They must also meet certain other eligibility criteria. These include that the house on which the retirement home loan is owed is their sole residence, that they lived there for three years prior to the initial application for the retirement home loan, that they have no interest financial in any other property.

For those who qualify, the nursing home loan becomes due after the death of the spouse/partner or that related person – or if they sell the property before that.

Since your brother will not move into the house until after your mother dies, he will not be considered a related person even if he has met the asset or income criteria.

Time is therefore running out and the loan will have to be repaid by next March. And yes, he will have to repay the full amount owed.

You have clearly worked out possibilities here, which is never a bad thing, but I have to tell you that the nursing home loan is only extended to cover the contribution to the cost of nursing home care that would have been payable on certain illiquid assets – such as the family home or land.

As you know, your mother had to pay more than 80% of her income and 7.5% of the value of her assets (above the threshold of €36,000).

Among the assets was clearly his house. The 7.5 percent contribution was levied on its market value but, unlike all other assets, only for three years. The retirement home loan is designed with the understanding that most people will not sell their family home – especially since until very recently this would subject everything you received for it to the annual charge of 7.5% to infinity.

The Health Service Executive will have taken over the property at that time as part of this process.

There is no possibility that the loan will be extended or that your brother will be offered a new loan with installment payments.

Borrowing interest

The rules state that the loan must be repaid within 12 months of your mother’s death and if this is not the case interest will be charged on the money and this interest will be backdated to your mother’s death in March . According to the IRS website, the current interest rate is 0.0219% per day.

It may not seem like a lot, but it will very quickly add up to a substantial sum. For example, if the loan repayment date passes, you will owe nearly $8,500 more in arrears interest just then.

It will not be the HSE you are dealing with, but the tax authorities who will collect the money owed on behalf of the HSE. And the person held responsible will be the one who was named as the responsible person at the time the nursing home loan application was made.

So what can your brother do? Well, he can apply for a mortgage to cover the retirement home loan. Given that the amount outstanding is, I believe, now significantly lower than the 22.5% of the appraisal made at the time the retirement home loan was applied for, it should be an attractive proposition for any lender as long as it has income to make repayments.

If he’s not a runner, then the family will have to consider whether they’re able – and happy – to fund the repayment of the remaining money up front, with that sibling repaying the sum over time.

You raise an interesting question regarding property valuation. An appraisal will have been required when applying for the retirement home loan. It was open to the HSE (or the patient and family if means had diminished) to request a review of this assessment at any time after one year had elapsed since the initial exercise. However, it seems that this did not happen in this case.

That being the case, I think you will only owe 22.5% – 7.5% per year for three years – of the home valuation when your mother first applied for the retirement home loan.

But I think all parties should seek the advice of a lawyer and a financial adviser before proceeding because, as I said, the current plans may well run counter to your mother’s intentions such expressed in their will and this could create both tax problems and the potential for discord within the family if everyone is not completely clear on what this arrangement means to them.

Please send queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or email [email protected]. This column is a reading service and is not intended to replace professional advice

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