Would paying off a mortgage be considered 'deprivation of capital'?

smyffie

Hi All.

This is my first time on here so please keep any unpleasantness to a minimum! (I have read some other threads!)

Anyway on to the question...I believe there is a likelihood of being made redundant shortly. Having been at the same company for over fifteen years and being relatively well paid and not blowing it all on drugs, drink and women, I have been able to overpay the mortgage such that my redundancy payout would be more than enough to clear it. What I need to know is if I don't manage to gain employment within the first six months (while I can claim contribution based JSA) will the fact that I have used the redundancy money in this way be classed as deprivation of capital if I need to claim income based JSA, and maybe council tax benefit. To my mind to pay off the mortgage must be the correct thing to do as if I instead use the redundancy to pay the monthly payments until its all gone, the JSA would then be insufficient to pay them (even less so if interest rates return to their long term average). As we all know the eventual outcome of mortgage payment failiure I really need to avoid that possibility.

Can I say I don't consider myself to be a scrounger from the state, at 39 years of age this will be the first time I have been unemployed. I have 'gladly' paid the highest rate of income tax when my earnings dictated such. I certainly hope to be back in employment ASAP but as my previous career was very specialised I do not condider it possible to get a similar job, and will therefore doubtlessly need to accept a much lower paid job, which is another reason that I want the mortgage cleared.

I hope this all makes sense and someone can give me some good advice with regard to this.


Smyffie

tcr_3

Yes, it could be considered deprivation. Every chance of it, tbh.

sunnygirls

I think its a real shame that a new poster knows they are going to get some unpleasant answers ,you can give honest advice without been critical and nasty ,surely thats what this sites about.

Indie_Kid

smyffie wrote: »

Yes the world has gone mad if I cannot use my money to pay off my debt. What will be next? Will the benefits people demand that a homeowner that is made redundant remortgages him/herself to the hilt as the house is a potential source of capital for the owner.

You can make the minimum repayments - but you can't pay off a huge chunk all in one go. That will be seen as deprivation.

zagfles

smyffie wrote: »

Like I said in the original post I didn'tcome on here for abuse but in response

• I have started looking for work and have already applied.
• I know there are jobs out there but none that I have the appropriate skills for. As stated in post I know I will need to accept a 'lesser' job than I am used to.
• I am not 'thinking' of going onto benefits, I am being put there by my employer.
• I certainly dont want a holiday away from work as I would go clinically mad as I need something to do. Would gladly do voluntary work.
• I would like to think that 'after getting all that money' I could use it to safeguard the roof over my head. Its not as if I'm using it to pay off debts from credit cards or other debts representative of people living beyond their means.
• Yes the world has gone mad if I cannot use my money to pay off my debt. What will be next? Will the benefits people demand that a homeowner that is made redundant remortgages him/herself to the hilt as the house is a potential source of capital for the owner.

I'm not so sure as everyone else - I thought that paying off debt is not generally regarded as deprivation of capital although the rules don't exclude it. It's a bit of a grey area.

Does your mortgage allow withdrawal of overpayments? Many do these days, ie you can overpay and then get your overpayment back if you need it. That might be the safe option, use your redundancy to overpay your mortgage (even leaving just £1 on it) rather than pay it off. Then if you need to claim means tested benefits, be honest about everything and if they do regard the overpayment as deprivation at least you can get your overpayment back! But make sure your mortgage allows this!

Oldernotwiser

You could pay off most of your mortgage except for £6,000. If it isn't considered deprivation this won't stop you claiming, if it is you'll have enough money to live off for another year.

tcr_3

zagfles wrote: »

I'm not so sure as everyone else - I thought that paying off debt is not generally regarded as deprivation of capital although the rules don't exclude it. It's a bit of a grey area.

Some repayment of debt won't be seen as deprivation e.g. if your lender has got a county court judgement against you and you're being chased by the bailiffs. The DM might well see it as reasonable that you're paying the debt off in full from savings. That's because you're doing that to get the bailiffs off your back, with little if any concern about benefit entitlements.

So yeah, you're right in a way, it is a grey area.

But I'd suggest it's too much of a risk to pay off your mortgage in full now in the expectation that 6 months down the line they'll award you means tested benefit ... because they might not award you anything at all.

And where will that leave the OP then ?

zagfles

tcr wrote: »

Some repayment of debt won't be seen as deprivation e.g. if your lender has got a county court judgement against you and you're being chased by the bailiffs. The DM might well see it as reasonable that you're paying the debt off in full from savings. That's because you're doing that to get the bailiffs off your back, with little if any concern about benefit entitlements.

So yeah, you're right in a way, it is a grey area.

But I'd suggest it's too much of a risk to pay off your mortgage in full now in the expectation that 6 months down the line they'll award you means tested benefit ... because they might not award you anything at all.

And where will that leave the OP then ?

Which is why I asked if his mortgage allowed withdrawal of overpayments. If it does then it's not a risk as he can "take back" the overpayment should he be denied benefits.

katygeorge

yeah dont think you would have much luck with the benefits, my husband has been made redundant and we have to prove how much he received in redundancy money, his was only £300 but they said that we could live of it for 2 weeks so help his claim back till them, so if you got £16k i would say they are gonna say thats enough to live of for 2 years. i know stupid isnt it, but thats how i have found the benefit system totally stupid. but i could well be wrong

tcr_3

zagfles wrote: »

Which is why I asked if his mortgage allowed withdrawal of overpayments. If it does then it's not a risk as he can "take back" the overpayment should he be denied benefits.

Genuinely dunno about that one. In theory it sounds OK, assuming the OP gets back into work. But if he hits a period of sporadic employment or long term unemployment, I can see problems down the line with any claim he makes for mortgage assistance from DWP.

Am unsure how they would assess someone's mortgage entitlements if their balance goes from only £1 outstanding to, say, £30,000 within a year or two, with most of that money being used for day to day living expenses and not for either house purchase or repairs/improvements. Not entirely certain how DWP would treat that.

Still think it safer to let savings naturally depreciate until the OP gets under £16k, means tested help kicks in plus help with his mortgage.

[Deleted User]

In most cases(except where court proceedings have been issued)you are only allowed to make the normal/usual, weekly/monthly payments on ANY debt to avoid it being seen as DofC