SMI query for working mum

dazattak

Hi All,

Apologies for the long-ish post, but my sister (Sarah) needs some help to try and stay in her current home and this seems the natural forum to get some good solid advice – so thank you all in advance.

In June 2009 Sarah found out that her partner (the kids’ dad) had racked up a lot of debt without her knowing – £30-40k. By the end of 2010 the relationship was over and he moved out in early 2011. Ironically, he works in financial services, but he lost his job in December 2010 and in January 2011 he seriously damaged his hamstring, and will not realistically be able to work for another six months. He is claiming benefits and living in a mate’s spare room, and has contributed nothing financially in 2011. Sarah works 11 hours a week and has a monthly pay packet of around £450. She receives only child tax credit and child benefit only – not income support or JSA.

Sarah and her ex bought a house a couple of years ago (joint mortgage) and have a £207k interest only mortgage with Santander, with repayments of around £770 per month. In February this year (2011) they defaulted on their mortgage payments. Despite spending several hours on the phone with Santander, going through income and expenditure in detail, they still call or text her 6-8 times a day demanding payment. (Question – is this an acceptable way for the bank to behave? She says that some of the calls are aggressive and verge on abusive. Or is this Santander’s legendary customer service? Can she get these calls stopped? How would she?). As a result of this harassment she has paid them £200 (in March) – which she really could not afford to – and put the house on the market. It is on at £250k and if it sells (and that’s a big if) they will probably clear a total of £20-25k. She owns 46% of the house and he 54% (as he contributed more to the deposit).

We desperately want Sarah (and the kids) to be able to stay in the house, but we cannot pay the full mortgage for her. All the advice to her seems to be that she has to sell the house, but she has now been given an MI12 form and told that she may be able to claim & get help with her mortgage payments. Even if we can get her help with 65% of it (say £500 per month) we could work with that. Today she received another letter from Santander saying that the case had been “referred to the legal department” which would lead to court action and repossession. And loads more costs and fees of course.

What I trying to find out are her options. Can we keep her in the house? Will she be able to get help via SMI and form MI12? All help received gratefully.

Cheers,

Darren

dmg24

What is he paying towards the mortgage? How much are the arrears?

Caz3121

how old is the youngest child?

welshmoneylover

dazattak wrote: »

Hi All,

Apologies for the long-ish post, but my sister (Sarah) needs some help to try and stay in her current home and this seems the natural forum to get some good solid advice – so thank you all in advance.

In June 2009 Sarah found out that her partner (the kids’ dad) had racked up a lot of debt without her knowing – £30-40k. By the end of 2010 the relationship was over and he moved out in early 2011. Ironically, he works in financial services, but he lost his job in December 2010 and in January 2011 he seriously damaged his hamstring, and will not realistically be able to work for another six months. He is claiming benefits and living in a mate’s spare room, and has contributed nothing financially in 2011. Sarah works 11 hours a week and has a monthly pay packet of around £450. She receives only child tax credit and child benefit only – not income support or JSA.

Sarah and her ex bought a house a couple of years ago (joint mortgage) and have a £207k interest only mortgage with Santander, with repayments of around £770 per month. In February this year (2011) they defaulted on their mortgage payments. Despite spending several hours on the phone with Santander, going through income and expenditure in detail, they still call or text her 6-8 times a day demanding payment. (Question – is this an acceptable way for the bank to behave? She says that some of the calls are aggressive and verge on abusive. Or is this Santander’s legendary customer service? Can she get these calls stopped? How would she?). As a result of this harassment she has paid them £200 (in March) – which she really could not afford to – and put the house on the market. It is on at £250k and if it sells (and that’s a big if) they will probably clear a total of £20-25k. She owns 46% of the house and he 54% (as he contributed more to the deposit).

We desperately want Sarah (and the kids) to be able to stay in the house, but we cannot pay the full mortgage for her. All the advice to her seems to be that she has to sell the house, but she has now been given an MI12 form and told that she may be able to claim & get help with her mortgage payments. Even if we can get her help with 65% of it (say £500 per month) we could work with that. Today she received another letter from Santander saying that the case had been “referred to the legal department” which would lead to court action and repossession. And loads more costs and fees of course.

What I trying to find out are her options. Can we keep her in the house? Will she be able to get help via SMI and form MI12? All help received gratefully.

Cheers,

Darren

Can she up her work hours to 16+ and then perhaps claim WTC and hence pay the massive mortgage herself?
Is she claiming child maintenance from the father?

dmg24

welshmoneylover wrote: »

Can she up her work hours to 16+ and then perhaps claim WTC and hence pay the massive mortgage herself?
Is she claiming child maintenance from the father?

I think this is the key phrase - even if she is entitled to some SMI, it may well be time limited and it isn't going to be enough to key up the regular payments. Plus, it will not touch the arrears. I can't see a court allowing such a situation to continue in the long term.

allen35

I don't think by claiming IS which would bring an entitlement to SMI after the waiting period of 13 weeks, due to the income of £450pcm.

I am sure new rules only gives payment on the first £100,000 at a rate of 3.63%.

Even if there is entitlement she would probably only be entitled to 50% help of the £100,000 as there are 2 people involved with a financial interest.

probably best to start looking at affordable rental properties where she would receive assistance with the rent.

diolch

My opinion is to offload the house. She will never be able to keep up with the monthly payments - even with SMI.
Cut your losses, sell, even if there is no profit, at least there will be no debt! £207K is a seriously big mortgage. Many are currently losing their homes with a debt of a lot less than that! How were they ever thinking of repaying the capital?

I'd be bricking it, in those circumstances, if I had a mortgage of a 1/4 of that.

Then find a rental property that Housing Benefit will cover. No point in renting at £600pm when getting only £420 in benefit. May not be in a nice area etc, but at least it is a roof.

Doing this will preserve your credit rating so that you can buy again in the future.

dmg24

allen35 wrote: »

I don't think by claiming IS which would bring an entitlement to SMI after the waiting period of 13 weeks, due to the income of £450pcm.

I am sure new rules only gives payment on the first £100,000 at a rate of 3.63%.

Even if there is entitlement she would probably only be entitled to 50% help of the £100,000 as there are 2 people involved with a financial interest.

probably best to start looking at affordable rental properties where she would receive assistance with the rent.

SMI is still available up to £200,000. If the ex is not paying towards the property she would be eligible for interest on the whole of that.

DaisyFlower

Her wage amount looks higher than IS or JSA so will she qualify anyway?

If she only works 11 hours, the best thing to do will be to get a second job or up her hours in the first one. 11 hours work is not enough for a mortage nevermind one as large as hers. If she truly doesnt want to sell, then she needs to gain more work asap.

dmg24

DaisyFlower wrote: »

Her wage amount looks higher than IS or JSA so will she qualify anyway?

If she only works 11 hours, the best thing to do will be to get a second job or up her hours in the first one. 11 hours work is not enough for a mortage nevermind one as large as hers. If she truly doesnt want to sell, then she needs to gain more work asap.

Yep, whilst she will not qualify for an IS payment to herself, the applicable personal allowance + housing costs will qualify her SMI.

dazattak

Thanks you all for your responses.

Re: the size of the mortgage (£207k). I know this is a big mortgage, he arranged it (and arranged an interest only one at that) and I have no idea how they were going to pay the capital back (and in truth I don’t think he did either). (The irony of him working in FS never fails to bring a grim smile to my face.) But the house is now the kids home and we would like them to stay there.

@welshmoneylover – In terms of Sarah’s working hours, she is right on the cusp. If she works an extra one hour a week she will not be eligible for one of her benefits. Also, she is a qualified NNEB and works for the local authority so her wages are low, and even if she upped her hours to 37.5 she would barely be able to cover the childcare fees with the extra income, let alone the mortgage.

@dmg24 – he is paying nothing at all, towards anything. Arrears are around three months (£2200) plus the fees they are piling on. Re. your comment: “If the ex is not paying towards the property she would be eligible for interest on the whole of that”, does that mean she is actually better off (in terms of benefit eligibility) if he is contributing nothing?

@Caz3121 – the kids are four and three