Support for mortgage interest benefit cut by thousands of pounds

chucky

ILW wrote: »

So why is it impossible to put by an emergency fund?

who said it wasn't?

you want people to...

build an emergency fund
pay their mortgages off as quickly as possible

by this time they'll be in their mid-forties or early fifties - that will be lots and lots of time to put money aside for their retirement and build a nice size pension pot... no wait

olly300

ILW wrote: »

So why is it impossible to put by an emergency fund?

It's not impossible but when that fund is eaten up by having an unexpected serious illness which costs a lot in terms of getting to and from hospital, or their spouse dies and this emergency fund is frozen then the Welfare State is being used in the spirit it is intended - as a safety net.

Likewise when someone loses their job and actually claims SMI - don't forget there are lots people who don't claim benefits until they are nearly destitute out of pride - then again the Welfare State is being used in the spirit it is intended.

mitchaa

silvercar wrote: »

Lets look at the "fortune" that can be made. Please remember that no-one makes money, all the SMI goes to the lender to pay the mortgage. If it covers more than just the interest then some capital is repaid - none of it goes to the borrower.

Maximum SMI is for a mortgage of 200k. Nothing is paid for the first 3 months (previously 6-9 months) so the borrower would have 3 months of arrears.

The SMI is dropping to 3.63 as this was the average rate that people are paying. So the average cost of a mortgage of 200k for a year is at 3.63% and is £7260. So the average benefit to anyone claiming over a whole year would be 9 months at 6.08% is £9120. Extra capital repaid is a grand fortune of....£1860.

Reducing your mortgage from 200k to £198,140 is not that exciting.

The average now will be zero as the rate has been reduced to the average level.

Now the second part of your statement, that tenants get nothing. Compare that with LHA where upto £15 a week can go to the tenant = £780 a year legitimately. As all the rent payments go to the tenant, rather than direct to the bank as with SMI, if a tenant doesn't pay all the rent over they are actually getting a lot more in their pocket.

If I buy a house today for £150k, I will pay £300k for it over a 25yr term. At the end of the 25yr term, the house may have trebled in value to £450k. I therefore make a £150k profit over the 25yrs.

If you buy the same house today for £150k and go onto ISMI tomorrow, you will only pay £150k for it and make a £300k profit. Of course if you were being overpaid, like the vast majority of people were over the last couple of years, then you wouldn't even pay the full £150k back yourself giving you even more profit.

You could potentially sell that house, spend the £450k and then start all over again. As to eligibility, well play your cards right with child planning and you can pretty much stay on income support indefinitely.

At least there is a 2yr limit for those on JSA which makes this money making scheme quite difficult to do.

ukcarper

How long do you think the bank will allow you to pay interest only

ILW

ukcarper wrote: »

How long do you think the bank will allow you to pay interest only

Many are on IO mortgages with the intention of letting inflation give them a get out at the end of the term by downsizing.

ukcarper

ILW wrote: »

Many are on IO mortgages with the intention of letting inflation give them a get out at the end of the term by downsizing.

Most interest free mortgages are for a fixed period and if the mortgage was repayment I don't think the bank will allow it to run for that long without any capital being paid off.

ukcarper

mitchaa wrote: »

If I buy a house today for £150k, I will pay £300k for it over a 25yr term. At the end of the 25yr term, the house may have trebled in value to £450k. I therefore make a £150k profit over the 25yrs.

If you buy the same house today for £150k and go onto ISMI tomorrow, you will only pay £150k for it and make a £300k profit. Of course if you were being overpaid, like the vast majority of people were over the last couple of years, then you wouldn't even pay the full £150k back yourself giving you even more profit.

You could potentially sell that house, spend the £450k and then start all over again. As to eligibility, well play your cards right with child planning and you can pretty much stay on income support indefinitely.

At least there is a 2yr limit for those on JSA which makes this money making scheme quite difficult to do.

I thought property prices were going to crash by 70% so wouldnt he still owe £150k but have a house worth only £45k

silvercar

mitchaa wrote: »

If I buy a house today for £150k, I will pay £300k for it over a 25yr term. At the end of the 25yr term, the house may have trebled in value to £450k. I therefore make a £150k profit over the 25yrs.

If you buy the same house today for £150k and go onto ISMI tomorrow, you will only pay £150k for it and make a £300k profit. Of course if you were being overpaid, like the vast majority of people were over the last couple of years, then you wouldn't even pay the full £150k back yourself giving you even more profit.

You could potentially sell that house, spend the £450k and then start all over again. As to eligibility, well play your cards right with child planning and you can pretty much stay on income support indefinitely.

At least there is a 2yr limit for those on JSA which makes this money making scheme quite difficult to do.

Fail.

You can't buy a house one day and go on SMI the next. Firstly you need to get a mortgage, so need to show a salary reference. Then you need a deposit-missing from your example. NOw wait at least 13 weeks before being eligible for SMI.

Most people with large mortgages who claim SMI will be on JSA, so they only get two years of support.

Who knows that SMI will run for 25 years. All your assumptions are exagerated.

mitchaa

silvercar wrote: »

Fail.

You can't buy a house one day and go on SMI the next. Firstly you need to get a mortgage, so need to show a salary reference. Then you need a deposit-missing from your example. NOw wait at least 13 weeks before being eligible for SMI.

Most people with large mortgages who claim SMI will be on JSA, so they only get two years of support.

Who knows that SMI will run for 25 years. All your assumptions are exagerated.

Good god, you are seriously picking me up about the 13wk time limit:rotfl:

The plan is still exactly the same though, you can take out a £150k mortgage today, give up your job tomorrow and ISMI will take over after 13wks. Forget about house deposits etc as that is completely irrelevant, if you take out a £150k mortgage then that is exactly what the government will base your claim on.

Too many have had it good too long. 6.08% with a BOE BR at 0.5% and a recession that has brought the country to its knees and ISMI claimants expect these freebies at this level to carry on? There were no complaints about the extra they were receiving but all hell breaks loose when it swings the other way.

I was actually surprised that the government didn't intervene in this matter a year or so ago.

MissMoneypenny

silvercar wrote: »

Most people with large mortgages who claim SMI will be on JSA, so they only get two years of support.

Which is why it is better to be too sick to work. More cash in hand every week and no time limit on SMI (yet) or getting the rent paid (yet).

The SMI rate was due to drop in January to 1.58% above bank base rate, so this new way of working out the rate is 1% more than they would have got anyway.

Next year, the rent money will drop by 10% for those who have been out of work for 2 years. Plus the LHA rates will drop to the 30th percentile instead of the 50th.

Single parents will be put on JSA when their youngest reaches 5 (it use to be 15, then 11, now 7). Those on long term sick, are having to go in to work support groups (unless they are terminally ill with cancer).