mortgage on benefit

twinkle_star_7

hi all,

I have managed to get a mortgage to buy my council home. Due to personal circumstances I am currently unable to work. I am in receipt of DLA, CA and IS.
On friday I received a letter from income support telling me that my benefit will rise in april by a couple of pound. I read the enclosed "changes you must tell us about" leaflet which says that I must tell them if I "decide to buy where I live".
Im now worried that taking out my mortgage may affect my entitlement to benefit.
Was wondering if this has happened to anyone else and the outcome. I dont want to keep any information from them as I dont want to get myself into trouble, but im unsure if Im doing the right thing by going ahead with my mortgage. Can my benefit be stopped? or reduced?
All help appreciated.

seven-day-weekend

Don't know whether this is any help, but my late MIL was granted a mortgage from the Council when she was on State Retirement Pension. That was also to buy a Council property.

She wasn't on any benefits other than Council Tax Benefit though, but I don't think it affected this.

viktory

Words fail me. In receipt of benefit, non working and buying a house. The benefit agency will probably want to know about any deposit you paid - and any income you have withwhich you will be paying the mortgage.

msmicawber

Hi Twinkle Star - can I ask whether your mortgage was agreed when you were working, or since you've been unable to work. If the former, then you might find that you can't go ahead anyway when you tell them that you currently have no earnings. I'd definitely check your mortgage terms as that may give you the answer.

twinkle_star_7

hi,
thanks for your replys, just to clarify I was on benefits when I arranged the mortgage, the lender knows this and is happy to proceed.
I had to stop work due to my son having disabilitys. I dont plan on staying on benefits forever, I do intend to return to work in the future depending on my sons condition.
I got a good price from the council which is why I decided to purchase the property now rather than later.

Tigger36

A warning....

Avoiding undue pressure to buy

In considering new initiatives to help people on low incomes buy their homes, it will be important that the Task Force ensures that schemes do not create opportunities for third parties to put tenants under pressure to buy when this may not be in their best interest. CAB evidence in relation to the Right to Buy indicates that some tenants on low incomes have been encouraged by mortgage brokers to buy their homes, on the basis of misleading advice. It will be important to ensure that these problems are not replicated with any new initiatives.

A CAB in Merseyside reported a single parent on income support that was informed by a mortgage broker that if she exercised her right to buy, he could arrange a mortgage, and that income support would cover the full mortgage payments as long as these did not exceed the amount she was receiving in housing benefit. In fact only part of her interest and none of her capital repayments were covered by income support. She now has a mortgage she cannot afford and is at risk of homelessness.

A CAB in Yorkshire reported a man in his 70s who had recently been discharged from a mental hospital following a suicide attempt after the death of his wife. He was visited by a representative of a private company who advised him that if he exercised his right to buy, he could get him a mortgage which would be cheaper than his current rental payment, although he was currently in receipt of income support. He agreed to go ahead and was provided with a 40-year interest only mortgage. The agent’s commission was £1200. He quickly got into arrears and the lender eventually repossessed the property. By this time the monthly contractual payments had increased to £943 pcm because of the addition of solicitors’ costs. The CAB discovered that at the time of the purchase, the client had almost sufficient savings to have purchased the property outright. The CAB is now helping the client make a complaint to the Financial Services Ombudsman.

A CAB in Yorkshire reported a man in his 70s in receipt of income support and housing benefit who responded to a leaflet drop from a company offering to help him purchase his property. He responded and an agent visited and advised him that as he was on income support he would have nothing to pay. He therefore went ahead with the purchase and took out a mortgage of £16,000. He now finds that he has to find £178 per month out of his income support to meet the shortfall between ISMI and the mortgage payment due. He is unable to sustain this and faces repossession.

CAB evidence across a range of subject areas repeatedly demonstrates how many consumers pay a high price for being ill informed and unconfident when it comes to making important financial decisions. It also shows how some companies within the financial services sector are able to take advantage of consumers’ lack of financial literacy to sell products and services that represent poor value. Doorstep selling of such products can compound the problem as consumers can be put under significant pressure to sign up without having time to reflect and seek further advice and information on the deal being offered.

Citizens Advice has recently produced two reports on these issues – Summing Up – bridging the financial literacy divide and Door to door – CAB clients’ experience of doorstep selling. Key recommendations from these reports of relevance to this Task Force include the need to improve access to independent advice, and that there should be a requirement for all consumers to be given a standard leaflet whenever a doorstep sale is made, which includes key information on consumer rights and sources of further information and advice.

We would strongly recommend that any initiatives to promote home ownership amongst low income consumers should ensure that such safeguards are in place and that there are procedures to ensure that all potential purchasers have access to a free source of independent financial and budgeting advice before proceeding with a purchase.

Tigger36

Unfortunately it hasn't sherbertpops but, for at least the reasons posted above, I believe it should stop. I strongly believe that people claiming IS should get help with mortgage payments if they bought their house BEFORE they went on benefits. But buying a house WHILST on benefits amazes me. I think the mortgage lenders are totally irresponsible. At the end of the day it's not the lender who will be left homeless if the mortgage repatments can't be met. How they sleep at night is beyond me...must be Horlicks!

msmicawber

Hi again twinkle star - is there a time limit on taking up the right to buy offer? If not, since you intend to get back into work once your son's care is sorted out, would it not be better to wait?

I would urge caution as I was encouraged by my Council a few years ago to go for one of those part-buy, part-let schemes. When I looked into it, despite having been accepted on the scheme and offered a mortgage, I quickly realised that there was no way I could meet the repayments, rent and repair bills, etc. by myself. I was quite surprised, since I had thought the Council, the Housing Association or the mortgage lender would have advised me not to go ahead with something so risky, but not one of them did. Luckily, I worked it out for myself in time. I know of a couple of people who've got themselves into financial difficulties through buying properties when on low incomes and benefits, but I don't know their circumstances in intimate detail.

everkeen

As far as I know, Twinkle, the benefit system will pay interest on your new mortgage up to an amount equal to your current level of housing benefit.
You must tell them.
Also, ignore any value judgements based on ignorance.

Broken_hearted

Why should they pay for someone to buy a house?

krisskross

If your son does not get granted further DLA or at a reduced rate will you be able to earn enough to pay the mortgage? Do be very very careful. As a tenant in social housing you will always have your home. The same could not be said if you were to buy and then be unable to meet the mortgage payments. You could find yourselves homeless.