Wise to pay extra mortgage payments while on benefits

wazza

My endownment policy and mortgage finishes in 2015. Like majority of endownment policy there will be a shortfall.

Currently on Income Support and am looking for a job. Have the interest of the mortgage paid by the DWP.

Thinking of paying extra per month to reduce the capital, whatever i have left over from tight budgeting. Then again since the interest is calculated on the capital once a year (Jan) i was thinking of saving up and paying it end of the year. I am thinking of a figure of hundreds and not thousands.

Will this cause any problems with DWP? Will they reduce the payments to compensate the extra amount i am paying?

Any advice greatly appreciated before i ring up the DWP/mortgage people to see what they say.

kelloggs36

No, you can spend your benefits on whatever you want to! It isn't deprivation of capital as you don't have a lump sum to live off (rather than pay off the mortgage).

carerof3

When I was on Income support (years ago) the amount they paid was often less than what the mortgage interest was, so I had to pay some of it anyway. Other times, when the mortgage interest went down, the IS amount was over the amount required by the bank so there was an overpayment. I've always overpaid extra when I can, and have now paid off my mortgage over 12 years instead of 20. I'm no longer on IS, but only in part time work on minimum wage as I'm a carer. The unperforming endowment provided enough money to pay off the mortgage after it had been reduced by the overpayments.

The only problem is if your mortgage company allows overpayments. Mine was the Halifax who allow 10% overpayment each year, or that was what it was for me. Income Support won't know, it's up to you what you do with your money. I wouldn't tell them though, as they might decide to investigate you in case you have some money they don't know about.

septemberblues

Surely you would in reality have to contact the IS mortgage people, as your mortgage interest would be less every month due to overpaying? In which case your amount that IS pay would go down (I think)

andyandflo

septemberblues wrote: »

Surely you would in reality have to contact the IS mortgage people, as your mortgage interest would be less every month due to overpaying? In which case your amount that IS pay would go down (I think)

Of course, if you reduce the capital, eventually, it will be re-assessed and consequently the help for the interest would reduce. I think the poster is looking to get the mortgage cleared asap, not how much she will get from the state.

ie let's say the rate being paid is 4%, but the rate being given in benefit 6.08%. So we have overpayments of 50% of the interest being charged each month courtesy of the government.
If then part of the capital is repaid as well, they will be well on their way to wiping years off their mortgage. Then it all depends how often the JC+ reviews the outstanding debt. If it is only once a year they are even better provided for especially if interest is calculated by the bank on the outstanding balance at the end of each month.

dmg24

septemberblues wrote: »

Surely you would in reality have to contact the IS mortgage people, as your mortgage interest would be less every month due to overpaying? In which case your amount that IS pay would go down (I think)

The eligible amount for SMI is reviewed by the JCP annually. There is no obligation to inform them of any minor changes to the capital amount owed in the interim.

wazza

septemberblues wrote: »

Surely you would in reality have to contact the IS mortgage people, as your mortgage interest would be less every month due to overpaying? In which case your amount that IS pay would go down (I think)

I think i know what you mean. My lender looks at the capital once a year, in Jan, and bases the interest on that figure. If i pay extra in March the the capital figure used for calculation will remain the same. So it makes sense to wait till end of year and pay as much as i can afford to reduce the capital before jan.

Does that make sense?

moneysaymoneydo

Hi Wazza, Every anniversary of your claim they write to your mortgage people for an update of outstanding amount and deduct accordingly although from Oct this year the amount is now to be reduced (average half of what you receive now) so this will make an impact also!

andyandflo

moneysaymoneydo wrote: »

Hi Wazza, Every anniversary of your claim they write to your mortgage people for an update of outstanding amount and deduct accordingly although from Oct this year the amount is now to be reduced (average half of what you receive now) so this will make an impact also!

And so it should be! Too many people have been having the interest covered + up to 50% more off the capital debt.

[Deleted User]

andyandflo wrote: »

And so it should be! Too many people have been having the interest covered + up to 50% more off the capital debt.

How do you come to that conclusion?Many people are stuck with mortgage rates above the 6.08% currently used for SMI,this will reduce to the bank of englands average mortgage rate from october currently around 3.9%,so someone currently with a £100k mortgage getting smi will have to find another £40 per WEEK.
And your assumption that it comes off the capital debt is incorrect also,especially for the VAST majority with repayment mortgages.!

wazza

moneysaymoneydo wrote: »

......... although from Oct this year the amount is now to be reduced (average half of what you receive now) so this will make an impact also!

This is news to me. Can you provide more details please