Downsizing when unemployed

bryanb

A work colleague (voluntary unpaid) lives in a large house worth approx 440k. She is currently unemployed and feeling the strain of mortgage payments. She would like to sell, and buy around 220k.
There is approx 90k equity in her house.
Is there any way she could do this in her present state? ie unemployed and managing mortgage payments from savings. She has a self employed partner who is not involved with the house ownership in any way, he is also feeling the pinch financially (building trade)

pie81

Realistically she is not going to get a mortgage with no income. Why doesn't she want to sell and then rent till she gets another job?

Jowo_2

I have not heard of any such scheme. Mortgages still generally require the applicant to demonstrate sufficient income to pay for the loan. If after buying a property for 220k using the 90k, how does she propose to pay the £110k mortgage with no income?

The Shelter website does provide information on government schemes to help owners that are struggling to pay their mortgage.

If her partner lives with her or supports her financially, any means tested benefits she applies for in the future will take his income into account.

There have been discussions on the benefit board about the unintended consequences of someone downsizing who then claims benefits because of the 'deprivation of capital' rules.

Basically, if a person makes a change to their income/capital and then claims benefits, sometimes they are deemed to have deprived themselves of it, and their claims get turned down. This type of thing happens when old folks transfer their properties to their children to avoid care home fees, give away sums of money they inherit and so forth. The state will then treat them as if they still have that capital (notional capital).

Post your query on that forum.

bryanb

[QUOTE=_Why_doesn't_she_want_to_sell_and_then_rent_till_she_gets_another_job?[/QUOTE]

Don't know that, I guess she has always owned House/business.

bryanb

Jowo wrote: »

I have not heard of any such scheme. Mortgages still generally require the applicant to demonstrate sufficient income to pay for the loan. If after buying a property for 220k using the 90k, how does she propose to pay the £110k mortgage with no income?

The Shelter website does provide information on government schemes to help owners that are struggling to pay their mortgage.

If her partner lives with her or supports her financially, any means tested benefits she applies for in the future will take his income into account.

There have been discussions on the benefit board about the unintended consequences of someone downsizing who then claims benefits because of the 'deprivation of capital' rules.

Basically, if a person makes a change to their income/capital and then claims benefits, sometimes they are deemed to have deprived themselves of it, and their claims get turned down. This type of thing happens when old folks transfer their properties to their children to avoid care home fees, give away sums of money they inherit and so forth. The state will then treat them as if they still have that capital (notional capital).

Post your query on that forum.

Thanks for your input, She has avoided the benefits route for 6 months or so, and I presume she will continue to do so until she gets a job. I don't know the extent of her savings, but I guess they are above the level when means tested benefits kick in.
I don't know figures, but her savings would obviously last much longer servicing a 220k mortgage than at present on 350k

BitterAndTwisted

I'd be tempted to sell up, take the £90k equity and buy somewhere outright with it.

bryanb

Sounds good, but it won't work in the South East. You don't even get a mobile home on a site for 90k.

BitterAndTwisted

I know, I live here but you failed to mention where in the country you were speaking about. In your friend's case I would consider selling and then renting for a while. Once back at work savings can be amassed and another property bought later. A mortgage on a property like that must be a massive burden. Any chance of taking in a lodger to increase income? Not that a property in the South East guarantees that there might even be a spare bedroom

bryanb

Thanks, yes there is a spare bedroom, I'll suggest that. Just really fishing to find out if any lenders (perhaps her present one) would be sympathetic as she is a good credit risk. Just the unemployment seems to be the killer.
Even then though, I believe the lodger's payments would be around 4k.pa Not a great relief on 1k monthly.

Milliewilly

If she's unemployed why not move somewhere cheaper and buy outright - why stay in the South East?

carefullycautious

What about a private exchange.

She could downsize to a smaller property and the others could upsize. This way the other people would be paying the extra to upsize and your friends would possibly be mortgage free