Paying of Mortgage with Inheritance

htch75

I have a question with regards to acceptable uses of inheritance for Income Support purposes.

I have a mortgage which through no fault of our own has been on interest only for some years now since I had to leave work due to illness. I have been unable to work since and I am entitled to some Income Support and Incapacity.

We have recently inherited some money which we always anticipated using to pay off the capital amount of the mortgage as the mortgage is due to be cleared in 4 years and we have no other means of settling this debt. We have been unable to make any capital payments since I have been unable to work.

If we use the money to live off our home will be repossessed in 4 Years, therefore we would like to pay the balance now, this would mean we no longer need the Interest Benefit but we need to be sure that this is acceptable before making the payment to the bank.

Any help would be most appreciated

RAS

I suspect paying off the whole mortgage would be unacceptable as this would put you in a better position regarding the mortgage and your outgoings than you would have been if you carried on working.

However, it might be a good idea to ask what the financial situation regarding the mortgage would have been (how much capital remaining) with 4 years to go. You may well be allowed to make up that deficit without getting into trouble. There have been some bvery good threads on here recently.

RAS

This is PP's comment on a previous case

Penelope_Penguin wrote: »

If he'd bouht a car for £20 k, he coulod have no access to the money any longer, either, but this would be clear deprivation of capital. I think in this circumstance it is possible, that he will be assessed as still having the £20k, which is above the £16k max for eligibility to CT benefit.

When I have clients on benefits who come into money, I advise them to be straight with Jobcentre regarding their intentions. I have seen clients who've used windfalls to pay off debts and mortgage, who have been fine, as they're reducing any future liability.

Not sure what Jobcentre will say in this case, but you need to contact them, or take advice (CAB for instance) quickly.

I would send a pm to PP and ask here to come on here.

Good luck.

htch75

RAS thank you for taking the time to respond, I am not quite sure I understand what you mean about a better financial position regarding outgoings and working. Sorry !

To clarify I have been declared medically unfit to work for over 10 years now and given my condition it is highly unlikely I will ever work again.

My monthly outgoings will remain unchanged as I have been unable to make any capital repayments since being out of work therefore I am not reducing my monthly outgoings by paying the mortgage off.

We will have no other means of paying this debt so what happens when the debt becomes due in 4 years time ???

bunny999

Do you have any equity in the house ? How much do you owe ? How much is the inheritance ? Paying off debts that aren't yet due can be seen as deprivation of capital. You need to consult the DWP before making a decision.

htch75

We have about 80% equity but this does not change the fact that the mortgage balance is due in 4 years. I will be unable to obtain a mortgage due to my health, the house is specially adapted for my disabled son so we would be unable to move and downsize.

I have asked the DWP the question and the person on the phone has stated that we are not allowed to pay off the mortgage, what are our rights of appeal ?

tcr_3

Thing is, if you pay off the mortgage DWP might think you've deprived yourself of capital (i.e. disposing of money you could've lived off instead of benefit) ... and you might find your Income Support & Council Tax Benefit terminated. But they can't touch your Incapacity Benefit.

With deprivation of capital, DWP have to prove that you've got rid of the money for the purpose of qualifying for benefit, or a higher rate of benefit, than you'd normally be entitled to. You could quite reasonably argue that your benefit entitlement isn't the big issue, it's rather that you have no means to pay off your mortgage in 4 yrs time and that you're simply paying it off now to ensure you've got a roof over your head.

You'll need to contact DWP, be upfront and ask them if they can tell you what will happen if you pay the mortgage off. I doubt they'll commit to anything for definite but one of their decision makers might be able to discuss the whole thing with you, give you a few pointers.

bunny999

If you pay off he mortgage you will be treated as if you still have the money. If this is over £16,000 then dwp means tested benefits will stop. If you don't pay the mortgage when its due you will get foreclosed. You will then get the money that is left after the mortgage co takes their cut. Bit of a catch 22.

tcr_3

htch75 wrote: »

I have asked the DWP the question and the person on the phone has stated that we are not allowed to pay off the mortgage, what are our rights of appeal ?

They can't forbid you from paying the mortgage off. What they can do is decide that you've deprived yourself of capital and they can terminate your Income Support.

Most people at DWP you speak to will have had no experience of this scenario ... and some might make it up "on the hoof". So you need to speak to someone higher up than them ... an Income Support Decision Maker (usually one of the Income Support section managers). Call them and see if that person is available to speak to.

Jowo_2

It's a complex area - paying off debts isn't automatically considered deprivation of capital. I have came across a case where someone paid down their mortgage with redundancy pay who successfully appealed a decision to deny them means tested benefits. Judge thought it reasonable for someone of their age to pay down their mortgage. OP should get expert advice.

DX2

tcr wrote: »

Most people at DWP you speak to will have had no experience of this scenario ... and some might make it up "on the hoof". So you need to speak to someone higher up than them ... an Income Support Decision Maker (usually one of the Income Support section managers). Call them and see if that person is available to speak to.

And if possible get them to confirm what they say on the telephone in writing.