House handed back - Deprivation of Capital!!!

TOBRUK

You shouldn't have agreed anything on the say so of a bank advisor without looking into things first. Why didn't you seek advice from CAB or someone, or even asked the DWP where you stood?

I don't think you are willing to admit your mistakes or take any advice on here. You believe you are right all the time and just won't take anything anyone else tells you.

Only a month ago you were saying that you had given the bank the keys and walked away and that way kept your credit rating intact so that you might get a smaller mortgage later! And then your quote:

Giving up your home is a positive step. You are taking decisive action now. Whether you give up your home or try to sell it makes no difference to your credit rating.

Re-possession does!!!

What will make a difference to your credit rating is either you sell it yourself, or the bank sell it for you and there isn't the equity in it to cover the debt and expenses which will leave an unsecured unpaid debt.

By giving up your home means that the equity is in the hands of the bank and as such will not be treated as notional capital for benefit purposes.
Selling it yourself will be a nightmare in todays market, you have to find a buyer, negotiate a price, instruct solicitors etc., and at the same time keep on paying the mortgage every month until it sells.

The main reason for handing back the house is that you don't have to worry every month in trying to find the mortgage money out of income. The bank have that problem and will take it out of the equity when it sells.

To make it clear: your credit file will only be affected whatever you choose, if there is not enough equity to settle all of the debts and expenses following the sale.

How is rental not ideal? Millions do it every day and find it ideal! You have no responsibility, other than internal decorations, for the property - that will save some money. Buildings insurance - landlord's problem.

Are you trying to say that renting is second best to buying??

rosysparkle

You don't seem to be comprehending this. If indeed you signed something for the bank relinquishing all rights to the property, then in the eyes of the DWP (and everyone else) you voluntarily gave away something like £80k of equity no matter what it eventually sells for. I expect the bank threw a champagne party, they got £80k for nothing. If, however, whatever you signed means you retain an interest in the property (and the equity once sold) then the DWP will determine that you are still the beneficial owner (which you are) and they will treat you as still having that asset.

I'm a charity finance officer and I can work this out without any difficulty, if you were an accountant then I pity your clients.

Either way, you may well be facing a very large bill in reclaimed LHA, and possibly other means tested benefits too.

I think you should take steps immediately to determine what exactly you signed for the bank. Then, go and see a solicitor who is experienced in benefits, and take their advice no matter how unpalatable.

andyandflo

tcr wrote: »

Andy, it's poor decision making on your part which has led you to where you are.

It's not the fault of the government, the DWP or civil servants.

Your first mistake was to assume DWP would pay your mortgage. Why would they ? You didn't use the mortgage money to buy the house, you owned the house already, you used the mortgage money instead to discharge a personal debt. Big mistake, your mistake.

The property was purchased by us in January 2003. The bank were slow in getting the mortgage monies out. I actually borrowed £103K to buy the house from a friend.
Two weeks later or so, the bank gave me £103K which discharged the debt used to buy the house and the bank took a charge over the property.
The money from the bank was never used to settle a 'personal' debt, it was used to pay off an existing loan/mortgage over the property.
Was that a mistake?

Your second mistake was to "hand in the keys" and give a ho use worth £180,000 to the bank to discharge a debt of £103,000 on some vague possibility they might "give you some money" if and when they sold it. Catastrophic mistake, your mistake.

Not really, I discharged a debt of £103K at no cost to me, no expenses nothing in exchange for the loss of a hypothetical amount of equity. With an agreement that I would receive an ex gratia payment from the bank if any of that hypothetical equity became reality.

But the greatest mistake you've made ? You've come here for advice and consistently ignored everything you've been told. Not only that, you've been giving out advice to others which has been half baked, ill thought out. And with every post you're ranting against "the system", "the DWP" as if you yourself weren't the architect of the entire mess you're in.

That is your opinion

I'm fed up to the back teeth of reading your posts. I respectfully suggest that, given you're not listening to a word anyone says, given that your advice to others is so poor, that you go find some other part of the forum to vent your frustrations.

I do listen to what everybody says, and if it makes good sense and is practical, given that everbody's circumstances are different, I will act upon it. On the other hand there is no point in giving information on something that I cannot change as in this case. All of the legal papers and the transaction took place long before anybody gave advice on the matter. You can't change the past only the present and the future.

rosysparkle

You needed to borrow £103k in 2003, but by 2004 you had £135k in savings? As they say on Dragon's Den, I'm out. If all this is true, you are the architect of your own financial misfortune.

sunnyone

Isn't it nice to see karma in action.

andyandflo

rosysparkle wrote: »

Imagine you had that £80k, not tied up in a house as equity, but sitting in a bank. Now imagine you give that £80k away, and claim means tested benefits. Would the DWP treat that as deliberately depriving yourself of capital - yes indeed. So why would you think it's any different if you give your £80k equity in a house to the bank? You've still given away an asset worth £80k.

Because the £80,000 is only a hypothetical amount. Equity only becomes physical equity when it is sold.
Who is to say that the property might only fetch £103K? In which case there is no equity.
I can't be said to have deprived myself of £80K if that £80K never existed but only in hopeful figures.
I have sold the property for £103K That is what the property was worth to me. So are you saying that the DWP or HB will come along at a later date and say different? How could they prove that it was worth more than £103K?

And if you had £135k in savings and a £103k mortgage, and chose to deplete your capital in daily living expenses over only 5 years rather than paying off your mortgage all I can say is more fool you.

OK. I have a mortgage of £103K and savings of £135K.
I have no income.
What do I live on?
I can't claim means tested benefits because of the savings.
I can't repay the mortgage because the DWP will say that I have deprived myself of that money by making that payment.
(I checked with them at the time)
They will therefore still treat me as having the money if I do pay off the mortgage.
Because of that fact I cannot still claim means tested benefits.

Think it through - The devil if I do and the devil if I don't!!!

Maybe that is clearer for you

andyandflo

rosysparkle wrote: »

You needed to borrow £103k in 2003, but by 2004 you had £135k in savings? As they say on Dragon's Den, I'm out. If all this is true, you are the architect of your own financial misfortune.

Yes I took out an interest only mortgage for £103K. The monthly repayments were interest only.
The £135K was in investments. The guaranteed return on those Government Bonds after tax was more than the interest that I was paying on the mortgage.
eg.
If I was paying 4% on the mortgage but getting 7% after tax on the investments, it would have been silly to pay off the mortgage. The investments were growing faster that the interest being charged on the mortage.

The intention was to pay off the mortgage when I was 65 in 2014. That way I would have made quite a nice tidy profit on the investments.

It is no different than borrowing money from the bank at 4% and
re-lending it at 18%
That would give a 'profit' of 14% without having to work for it.
That's how money lenders make their money!!

AnxiousMum

andyandflo wrote: »

Yes I took out an interest only mortgage for £103K. The monthly repayments were interest only.
The £135K was in investments. The guaranteed return on those Government Bonds after tax was more than the interest that I was paying on the mortgage.
eg.
If I was paying 4% on the mortgage but getting 7% after tax on the investments, it would have been silly to pay off the mortgage. The investments were growing faster that the interest being charged on the mortage.

The intention was to pay off the mortgage when I was 65 in 2014. That way I would have made quite a nice tidy profit on the investments.

It is no different than borrowing money from the bank at 4% and
re-lending it at 18%
That would give a 'profit' of 14% without having to work for it.
That's how money lenders make their money!!

True, but most don't just then give away their assets at the drop of a hat like you did, and then expect the state to pay your costs of living for you!

So um, where's the house? I'm thinking a house valued at £170-180K for £103K might possibly be a good investment, and we all know the bank will take what they can get in a quick sale.......

andyandflo

rosysparkle wrote: »

You don't seem to be comprehending this. If indeed you signed something for the bank relinquishing all rights to the property, then in the eyes of the DWP (and everyone else) you voluntarily gave away something like £80k of equity no matter what it eventually sells for. I expect the bank threw a champagne party, they got £80k for nothing.

If, however, whatever you signed means you retain an interest in the property (and the equity once sold) then the DWP will determine that you are still the beneficial owner (which you are) and they will treat you as still having that asset.

I'm a charity finance officer and I can work this out without any difficulty, if you were an accountant then I pity your clients.

Either way, you may well be facing a very large bill in reclaimed LHA, and possibly other means tested benefits too.

I think you should take steps immediately to determine what exactly you signed for the bank. Then, go and see a solicitor who is experienced in benefits, and take their advice no matter how unpalatable.

I know what I signed, but yes I will have it checked out.

The money has no consequence to me.
I just wanted rid of the property the fastest way possible.
If it wasn't the bank that had come up with the suggestion I would have sold it to one of those property developers you see in the paper that buy properties at 75% of their value in exchange for an immediate settlement.

I am personally quite clear that I do not have any retained interest in the property. It was a bone fide transaction.

I have no rights of entitlement to any of the possible equity.

Just an informal agreement between the bank and I that they will let me have something in as an ex gratia payment. They are well within their legal rights not to make any payment, and likewise I have no legal rights to sue for any payment.

If however there is a problem with the sale and the transfer agreement then it will have to be rectified to represent what was intended and decided by the bank and me. I don't want anybody coming up with arguments that I still have an interest.

It was quite clear that I had sold outright the property at a lower price in exchange for an early settlement.

rosysparkle

I know I said I was out but:

Who is to say that the property might only fetch £103K? In which case there is no equity.
I can't be said to have deprived myself of £80K if that £80K never existed but only in hopeful figures.
I have sold the property for £103K That is what the property was worth to me. So are you saying that the DWP or HB will come along at a later date and say different? How could they prove that it was worth more than £103K?

Yes, I'm saying exactly that the DWP or HB will come along and say that the house was worth more than £103k. They will look at similar properties, at the price paid, at the house price trend, at the asking price, the price it eventually sells for, and they will determine a value. They may even get a RICS surveyor out. Have you not come across the concept of notional capital? I very much doubt you've not been told this before.