Question about HB?

happymonday77

We currently own our home via mortgage and have our mortgage paid via ISMI.We are out growing our house. If we sold our house and paid off the mortgage, could we then get HB to rent?

If we sold and made money on our home would the HB take that into account? I think our house is worth 200k max our mortgage is 176k and we have 16k of cc debt which I am trying to pay off, if we made some money on the house and used that to pay the cc debts off would the hb see that of deprivation of capital etc?

Also last question, if we sold our house to FIL as he is currently house hunting would the HB look badly on that?

Sorry lots of questions. Please dont slate me.

Thanks for reading.

Hammyman

If you sell your home and make money out of it, you may find the tax man wants a lump of it as capital gains tax - 28% of everything over £10,100 (£22,200 using both your allowances) AFAIR. The benefits system will also look at the amount you have in your bank account as well and this could affect your entitlement to benefits depending on the amount left after clearing debts as you're not buying another house but using the money to pay off debts shouldn't count against you - there are plenty of people in the same boat doing exactly the same. Looking at the figures you've posted, once you've taken off legal fees etc, there may be very little left after clearing the £16k debt. One thing you will find though is that in the period between you selling the house and paying the debts when you're likely to have the thick end of £20k in there, you will probably find a temporary stop goes on them and you need to explain what you're doing, i.e clearing off the debts you've most likely accrued whilst being off work.

If you sold your house to your FIL, it wouldn't be looked on favourably and you'd have a lot of explaining to do - basically you'd need to prove it was above board and no preferential treatment was given but again, this would be more to do with you having a load of money sat in the bank which you're unlikely to.

At the end of the day if you're in dire straits and struggling and this is the best solution, take it. If you banked to clear the £16k debt, you'd lose the house anyway and probably have the mortgage company chasing you for a shortfall so best taking the option that gives you some control, even if it means a bit of grief and more paperwork down the line.

gravitytolls

I can't see why HB would even want to know who bought the house, the only issue would be if FIL bought it and rented it back to you to be paid with HB, or if he paid less than it's value.

In terms of selling your house and clearing outstanding debts, that shouldn't be a problem, DWP will need to know as well. They will want to see the paperwork, know what you've paid and how much you have left. You are allowed certain amounts for resettlement, obviously taking into account deposit, removals etc., then any monies left over are deducted from your benefit if they exceed a certain amount.

I daresay HB will be the same. Basically, as long as you have a paper trail and can prove you've not sold up, frittered the proceeds away and expected to claim your living expenses when it's all gone, you should have no problems.

There's nothing wrong with contacting your local council and asking about their position on this, then you know definitively if you can go ahead.

Jowo_2

Hammyman wrote: »

If you sell your home and make money out of it, you may find the tax man wants a lump of it as capital gains tax - 28% of everything over £10,100 (£22,200 using both your allowances) AFAIR. .

CGT isn't payable for a person's primary residential address - this is a tax for second homeowners and landlords.

I am not aware of the position on paying off debts then applying for means tested benefits - this may come under the 'deprivation of capital' rules so Google this, plus the concept of 'notional capital'. Deprivation of Capital rules are there to prevent people from changing their circumstances to better qualify for benefits. Make sure you get expert advice on this before paying off your debts and then perhaps finding a future LHA claim is rejected.

sunnyone

Hammyman wrote: »

If you sell your home and make money out of it, you may find the tax man wants a lump of it as capital gains tax - 28% of everything over £10,100 (£22,200 using both your allowances) AFAIR. The benefits system will also look at the amount you have in your bank account as well and this could affect your entitlement to benefits depending on the amount left after clearing debts as you're not buying another house but using the money to pay off debts shouldn't count against you - there are plenty of people in the same boat doing exactly the same. Looking at the figures you've posted, once you've taken off legal fees etc, there may be very little left after clearing the £16k debt. One thing you will find though is that in the period between you selling the house and paying the debts when you're likely to have the thick end of £20k in there, you will probably find a temporary stop goes on them and you need to explain what you're doing, i.e clearing off the debts you've most likely accrued whilst being off work.

If you sold your house to your FIL, it wouldn't be looked on favourably and you'd have a lot of explaining to do - basically you'd need to prove it was above board and no preferential treatment was given but again, this would be more to do with you having a load of money sat in the bank which you're unlikely to.

At the end of the day if you're in dire straits and struggling and this is the best solution, take it. If you banked to clear the £16k debt, you'd lose the house anyway and probably have the mortgage company chasing you for a shortfall so best taking the option that gives you some control, even if it means a bit of grief and more paperwork down the line.

you dont pay capital gains tax on the sale of the family home.

Indie_Kid

Jowo wrote: »

I am not aware of the position on paying off debts then applying for means tested benefits - this may come under the 'deprivation of capital' rules so Google this, plus the concept of 'notional capital'. Deprivation of Capital rules are there to prevent people from changing their circumstances to better qualify for benefits. Make sure you get expert advice on this before paying off your debts and then perhaps finding a future LHA claim is rejected.

It does come under DoC rules. There are debts called "priority debts".

Jowo_2

sh1305 wrote: »

It does come under DoC rules. There are debts called "priority debts".

Here is a posting on a forum that indicates that credit card debts are considered non-priority debts.

http://www.consumeractiongroup.co.uk/forum/showthread.php?250542

http://www.direct.gov.uk/en/moneytaxandbenefits/managingdebt/planyourwayoutofdebt/dg_10013266

Hopefully someone can post the current DWP advice on DoC and priority debts to help the OP. The OP should take expert advice before taking any decisions to sell the house.

andyandflo

gravitytolls wrote: »

I can't see why HB would even want to know who bought the house, the only issue would be if FIL bought it and rented it back to you to be paid with HB, or if he paid less than it's value.

QUOTE]

I don't see the problem here. If the property was sold for a true open market price, it matters not to whom it was sold.
In your case, if it was your father in law that bought it, and rented it back to you - provided it was done correctly through a letting agent, that he did not live there with you and with a tenancy agreement for a fair market price - so what! There would be nothing stopping your FLI at the same time as purchasing, entering into a separate agreement with you for a lease - buy backback scheme which has nothing to do with the tenancy. It certainly is not a contrived tenancy and what happens in the family is of no concern to anybody - although some might try to start screaming it's not fair or just!!

From Insolvency law, this is quite a normal occurrence in a bankruptcy. It is merely a way of staying in the home that you love, and the Receiver giving credit for you to pay rent to whoever is the landlord with the intention to re-acquire the property at a later date taking into account the rent paid as prepurchase of the equity. It is good and sensible advice. If you have a bonefide tenancy agreement then LHA should be paid in accord with your circumstances.

What is the real difference anyhow, you have the interest paid already which is being exchanged for rent.

What is the difference to the property investors you see in the newspaper - buy and rent back!!

Unless I am missing something here and no doubt somebody will inform me.

Benefits_Bod

WARNING - be VERY careful about selling your own home and then renting it from the purchaser.

In short, if you (or partner) rent a home you have owned within the last 5 years, HB is not payable - there is only one exception which is:

"...where he satisfies the appropriate authority that he or his partner could not have continued to occupy that dwelling without relinquishing ownership".

andyandflo

Benefits_Bod wrote: »

WARNING - be VERY careful about selling your own home and then renting it from the purchaser.

In short, if you (or partner) rent a home you have owned within the last 5 years, HB is not payable - there is only one exception which is:

"...where he satisfies the appropriate authority that he or his partner could not have continued to occupy that dwelling without relinquishing ownership".

Quite correct.

the regulation is satisfied if he/she/they could not continue to live in the property (due to being unable to maintain repayment in full & taking into account all of the other priority debts and expenses), all of the loans/mortgages that were secured on that property.

If it is found that for these reasons that the only option was to sell the property and to continue living in it, agree to a rental agreement, HB would be paid.

happymonday77

Thanks for all the help. If FIL purchased the house it would be for him to live in, not us.
From all the info provided I feel I need to have a long think about this as I dont really want to get off the ladder but the extra space would be better for the family, plus the cc debts gone would make life a lot easier!

Tough one and I will call the council and ask for their advice too. xxxx