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

smyffie

cyclops. wrote: »

Yes a friend of mine actually did that. He remortgaged the property so that he had money to live off whilst looking for a job. He paid the mortgage out of that money also. All of this was done with the intention of not being like the rest of society, and taking money in the form benefits. He wanted to be independent. The money lasted him for 4 years. By the 5th year it had all gone, and he still did not have a job. So he claimed JSA & CT & Help for his mortgage. He received the first two but they refused the third as it was not a mortgage as such that he took out to buy the home. Not being able to pay the mortgage, by the end of the 5th year the house had been repossessed and he lost everything. Was homeless for a few months until he managed to get a rented flat.

So there you are, if he had claimed benefits in the first place he had no mortgage, and would still be living in his home with a considerable amount of equity to his name.

Was he right to be so proud? Or did he do the right thing to try to be independent and not be a scrounger?

While such behavior is very commendable in not wishing to be a scrounger, this is the very situation I am worried about. I do not want to be out of work at all, let alone for five years but with the country is its current state (rapid rises in redundancies, rising unemployment and increases in the number of immigrants taking many of our jobs [not a point for discussion on this board]) I fear for my ability to rapidly obtain gainful employment.

While your friend did do the morally right thing, all morals must go out the window when there are so many people scrounging off the state who have no intention of working because they can manipulate the system to get a better advantage than the hard working people that have morals and dont want to rely on other tax payers to fund their lifestyles. We are not on a level playing field.

smyffie

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.

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!

Yes the mortgage does allow withdrawal of overpayments, and in the past I have drawn back on previous overpayments as with a current interest rate of 2.5% it seemed far more suitable than a typical car loan with whatever APRs were available at the time (and at the time I did intend to pay off as rapidly as I could)

smyffie

woodbine wrote: »

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

So does that mean I will only be able to pay the minimum payments from credit cards that I use for as many day to day living expenses as possible (in order to make full use of the cashback facility)? Whereas currently they are paid off in full every month.

shikoku

I would slice up the credit cards right now!

There are plenty of conventional and pre paid debit cards available.

Emmzi

personally i'd take a chance on finding a job withing 6 months and pay off the mortgage. And cut up the credit cards so I wasn't tempted. There will be some kind of grim job out there that will pay the leccy and food bills, and I'd go on a DMP for the credit cards if it came to it.

Oldernotwiser

Credit cards and unemployment aren't a good combination; put them in the freezer until you get another job.

smyffie

Oldernotwiser wrote: »

Credit cards and unemployment aren't a good combination; put them in the freezer until you get another job.

Many Thanks for the advice and I certainly agree with you. However it is only used for the convinience of

• 1% cashback on purchases
• Being able to monitor general monthly spending on food, petrol and all other costs

It has always been paid in full and always will be. I truly believe credit cards are evil things if used 'incorrectly' and would never spend more on them than I know I can afford. I know this may have been easier for me in the past but I personnally hate debt hence my original desire to rid myself of the mortgage!

Indie_Kid

smyffie wrote: »

Being able to monitor general monthly spending on food, petrol and all other costs

Huh? You could just draw the money out of the bank and do it that way.

smyffie

sh1305 wrote: »

Huh? You could just draw the money out of the bank and do it that way.

Yes you're right I could. I find the monthly C.C. statement is clearly presented and enables me to easily tot up expenditure within my own personal caterories. Just my preference as a bank statement includes other stuff including direct debits (which will need my attention shortly too!)

zagfles

tcr wrote: »

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.

The DWP can't have it both ways. Either it's available capital or it isn't. If they point to his £30,000 overpayment and say "that's deprivation of capital", then they can't complain if he uses that capital to live off!