Is mortgage overpayment regarded as savings?

wazza

I have an endowment mortgage which was taken out in 1990. The payments are made through direct debit. The building society sets the amount. I have been on JSA since March this year.

I know that JSA will only pay interest on mortgage for 2 years.

Talking to the mortgage provider it seems i have been paying more than i should be over the years and that there is an overpayment of around £2k.

I want to make more payments to reduce the mortgage. Thinking about paying £50-£100 per month if it is 'spare' cash.

I have been reading a different thread here titled 'mortgage shuffling' and am a bit confused.

Is the overpayment on the mortgage account classed as savings? I can't see why because i can't take that money out for personal use.

Thanks in advance for any replies.

BigAunty

Deprivation of capital rules are designed to prevent people from exploiting the benefit system by reducing their savings to qualify for them - for example, paying off a loan early when there is no legal requirement to do so, gifting money to relatives.

I've seen posts on this forum from claimants who seem to curse getting a windfall and want to burn through it rather than use it to pay their council tax and rent, for example, and do not want a break in any of their claims, or want to go back on them asap rather than spend their nest egg in a measured way on living expenses.

Some want to pay off their consumer debts and I don't know how they stand with this according to the rules. On the one hand, it sounds sensible to sort them out. They definately can pay them off if there is a legal obligation to do so. On the other, if they have a smaller, manageable commitment to deal with a HP loan, why should this change when they receive a lump sum - why should the tax payers cough up for their rent/council tax/groceries etc while they swan off and pay off a debt for a holiday/new kitchen/car or similar?


I can't answer your specific question, btw, but just want to give a wider context to why there are rules in place that forbid a claimant from knowingly depriving themselves of capital in order to better position themselves for income related benefits and why this can cover paying off loans early when there is no requirement to do so.

EDIT -

I've come across that thread you mention but as a newby, I can't post links.

I think your situations are a bit different - the other poster is considering using the bulk of his savings to pay down his mortgage in a single instance ahead of making a benefit claim. They are doing this for what sounds to be a completely logical reason from an investment perspective but not necessarily from a benefit perspective. Savings above 6k affect income related benefit claims and above 16k pretty much rules it them out.

They have 11k in savings and hoped to use 6k of this against their mortgage. In doing so, they are moving from a situation where they would only get partial income related benefits to full income related benefits as they would have less than 6k savings.

It's worth mentioning, however, that deprivation of capital rules is about a person intentionally making changes to their capital in order to claim benefits (i.e. deliberately).

rogerblack

As I mentioned in the other thread where you posted this - no.
If you can't get it, it's not savings.
Money you pay in (if you came into 10 grand, and paid it in) may be treated as 'notional capital' - that is - as if you still had it.
But you are not obliged (yet) to only pay for reasonable expenses out of benefits.
You can burn every third pound you receive, without any issue, or pay it into your mortgage.
It's only if you start to get close to the 6K savings limit that there becomes an issue.

wazza

Thanks for the replies.

BigAunty - i am in a fortunate position where i do not have any loans etc apart from a mortgage. Thanks to my ex who left me after emptying my bank account i only have savings around £1k which is for emergency use. I understand what you mean by those who come in a large amount and want to spend it quick and quietly so it would not affect their benefits.

In my case the endowment policy is as expected underperforming and will not pay off the capital/mortgage. I am hoping to narrow the shortfall by paying extra into the mortgage account. I hope to pay around £1k a year, it won't make a big dent but should at least help.