House handed back - Deprivation of Capital!!!

andyandflo

Hi everyone,

Things cannot get any worse than they are right now.

After losing our home in early August and after telling Pension Credit about it (because of change of address), they have now written to me asking how much equity was in the property, who now owns the property and when was it actually given away.

I only get £5.25pw off them!

Apparently they are looking at it as 'Deprivation of Capital'.

Come on now, all of our savings have gone - with what we had to use to live on in between 2004 and 2009 because our capital precluded us from means tested benefits, the loss of our home (including furniture) for which we put down £60,000 deposit in 2003 and now they are trying to say that we have given away £80,000 being the equity in the home when we handed the keys in.

I am not so worried about losing the £5, but what this will cause in future years if we do need to claim more Pension Credit if I can't get JSA (Contribution based) anymore.

I know I have an argument that the equity does not exist until I actually receive it from the bank following the house auction. But when I do, will I have to use that up as well to live off before I could claim any future means tested benefits?

If that is the case all of the hard work I put in over the years and did the right thing to save for a home for the two of us, and have savings in the bank for a rainy day has gone. All we are left with are a few sticks of furniture in a crummy rented 1 bed flat in not a very nice area.

Where is the justice in all of this? I am no better off, than if I had sat down for years and claimed benefits or had spent the whole lot a long time ago on wine women and song!!!!!

Oldernotwiser

What equity do you expect to realise when the house is sold and what are you planning to do with it?

andyandflo

Oldernotwiser wrote: »

What equity do you expect to realise when the house is sold and what are you planning to do with it?

Well if the house sells for the reserve price and after allowing for the bank's fees etc, I would hope to get maybe £20,000 - with the home selling for £150,000 (£30,000 below current value, with mortgage of £103,000 and bank fees etc of £30,000).

The intention is to use it to buy a better 2 bed flat somewhere with a mortgage. But if that is not possible now because of the mortgage problems in the country, then to hang on to it for a while until I can get a mortgage. I certainly don't want it frittered away!

cassieB57

Excuse my ignorance but as a homeowner with a mortgage myself, I do not understand what purpose 'handing the keys in' would have served-the house never belonged to the lender; assuming the mortgage was secured, they have interest only, and as far as I understand, legally, it still belongs to you? The lender would want to get their money back as soon as possible so would want the house sold at whatever price they can get for it, whether that is market value or not, even if it doesn't cover what you owe. Wouldn't you be better off marketing it yourself?

Having said that, as far as benefits go, if you are the legal owner and the house IS on the market, then the value is disregarded until it has been sold. Though it might be argued that you have deprived yourself of the full market value by leaving it up to the lender to sell, thereby ending up with far less than it was worth or even with nothing.

Oldernotwiser

andyandflo wrote: »

Well if the house sells for the reserve price and after allowing for the bank's fees etc, I would hope to get maybe £20,000 - with the home selling for £150,000 (£30,000 below current value, with mortgage of £103,000 and bank fees etc of £30,000).

The intention is to use it to buy a better 2 bed flat somewhere with a mortgage. But if that is not possible now because of the mortgage problems in the country, then to hang on to it for a while until I can get a mortgage. I certainly don't want it frittered away!

By "frittered away" do you mean supporting yourself and your wife?

andyandflo

Oldernotwiser wrote: »

By "frittered away" do you mean supporting yourself and your wife?

Yes, because when it is gone it is gone and we end up going from a nice 3 bed semi with £80,000 of equity to no money in the bank, living in a crummy rented 1 bed flat. Surely we should be allowed to keep the proceeds to reinvest in another property?

It's not as though the capital was there to start with - it was tied up in our home.

I don't understand this. We had a home and mortgage with £80,000 tied up in it and was getting, in total, £202 in means tested benefits.

Then we lose the home, have to use the equity to live off then we can only claim the means tested benefits when it is all gone?

We would have been no worse off keeping the home - OK yes paying the £300 mortgage, but that other way it will have cost us £80,000 in one hit.

I don't see that as fair. 1000's are keeping their homes and are on means tested benefits and have equity, just because the bank now have the property.

Never mind, as I said at the beginning, things can't get any worse. Just something we will have to cope with.
Oh yes one more thing, would I be right in assuming that if the bank take the lot then I could go back onto means tested benefits?

Thanks

TOBRUK

A few weeks ago you were saying that it was the best thing you did was to "give back the keys" and walk away. You went on to say you now lived in a rented property without the pressures and had your rent paid for! You were even giving people advice to do the same and renting was better! Who was/is paying your rent?

Who owns the house now? I'm a little confused, although you say you gave the keys back, you are expecting money from the sale of the house, so is your name still on the house? If so, you are officially the house owner AND you are getting your rent paid, so I presume you are getting HB - is this correct?

dmg24

You have been warned several times that your plan could be seen as deprivation of capital, so you can't say this is news to you.

The difference between paying benefits to someone with a property is that the equity is not available to them, if you (or someone else) sell the property then the equity is now a liquid asset, it is available to you to spend.

As ever, when people tried to give you advice you thought that you knew better. Now you need to go and get proper advice before things are taken out of your hands completely, and actually take on board the information you are given.

andyandflo

cassieB57 wrote: »

Excuse my ignorance but as a homeowner with a mortgage myself, I do not understand what purpose 'handing the keys in' would have served-the house never belonged to the lender; assuming the mortgage was secured, they have interest only, and as far as I understand, legally, it still belongs to you? The lender would want to get their money back as soon as possible so would want the house sold at whatever price they can get for it, whether that is market value or not, even if it doesn't cover what you owe. Wouldn't you be better off marketing it yourself?

Yes I can't argue with that. I won't go through the reasons why it came to that other than I went down to Barclays Bank (mortgage was with the Woolwich) and told them that as I was not able to get any help through the government's mortgage interest support scheme. I had by this time used up all of our savings (£135,000) in supporting ourselves and paying the mortgage from 2004 until late 2009 because I couldn't get any help from the DWP by way of benefits.
Anyhow they asked if I thought we could guarantee to meet all of the future repayments (mortgage was upto date) I said I didn't know - probably not. The mortgage advisor said that the best thing I could do is give up the property in favour of the bank which I did. I signed over the property signed a few legal papers etc and handed the keys to him and walked out. We had already found this rented place and had moved the bed and a few other things in.
That was the last time I went in the property.
They said that all of the hassle of selling the property would now be theirs not mine.
I can't sell it can I? They now own it.

Having said that, as far as benefits go, if you are the legal owner and the house IS on the market, then the value is disregarded until it has been sold. Though it might be argued that you have deprived yourself of the full market value by leaving it up to the lender to sell, thereby ending up with far less than it was worth or even with nothing.

Yes that is something like what they are saying. But I won't know if there is any money left for me until after the auction next month and the fees have been paid.
Well then if I don't get anything, there is not a great deal I can do about it now. I took professional advice from the bank and followed it. What more was I supposed to do. Stay there and worry every month if I could find the £300 odd mortgage payments?
I have nothing more to do with it, they told me that, so how they could say that I have deprived myself of money I have no idea.

As I have said before, renting is much better, at least I don't have the worry about finding the rent money each month - HB pays that for us.

Bogof_Babe

2004-2009, so five years mortgage @ £300 a month = £18,000.

That leaves £117,000 of your savings, which you appear to have spent at the rate of £23,000 a year?

That's quite good going for someone wanting to make his savings last.

andyandflo

TOBRUK wrote: »

A few weeks ago you were saying that it was the best thing you did was to "give back the keys" and walk away. You went on to say you now lived in a rented property without the pressures and had your rent paid for! You were even giving people advice to do the same and renting was better! Who was/is paying your rent?

Yes that is correct. The worry and pressure thinking about next month's mortgage payment was too much.
All of that has now been lifted. Housing Benefit pays the rent. We made sure that we rented somewhere that the benefit would cover, in fact the rent is less than the rent they would give us - hence why it is small and in a poor run down area.
Not now having that financial problem, was like winning the lottery!

Who owns the house now? I'm a little confused, although you say you gave the keys back, you are expecting money from the sale of the house, so is your name still on the house? If so, you are officially the house owner AND you are getting your rent paid, so I presume you are getting HB - is this correct?

As far as I am aware from what I remember from the forms I signed, the bank now owns the property. They have changed the locks - I know that as I went down to see what was happening and my old neighbour said that two workmen had been working on the locks.

As far as I am concerned I don't own a property and yes I claim HB for the rent as without that I would be in the same boat as I was before - worrying about the mortgage payments.

I hope this explains things for you