Help me, stupid move!!

Rocky99

Hi to anyone who reads this and a big thank you for any advice in advance!

Ok here's my situation:

Own a house which is in £25000 negative equity, moved out due to neighbour dispute and house too small for growing family. Rented out since we moved out 3 yrs ago no problems but having to add around £150 a month to the rent to pay mortgage (btl mortgage)

For last 3 years rented a house we have fallen in love with. Landlord will sell it to us but couldnt get a deposit big enough. We can continue to rent for the next three years (hopefully) that's if landlord doesn't want to sell before then!

Ok so this is the BIG problem we have!
Two years ago my elderly father attempted to commit suicide. He was ok but the attempt uncovered the fact he had racked up £80000 worth of debt. They were in a hole with the only positive being the fact they owned their house out right. They looked into equity release but didn't release anywhere near enough to pay debts. So in my blind wisdom I managed to talk my husband into purchasing my parents house for £150000. My parents had a majority of the money and we had enough to get a car as ours was ruined. At the time of purchase the house was valued at £250000, we had it valued last week and it came back at £200000, £50000 drop in two years!!

So right now we are struggling financially monthly as my parents live rent free and could not possibly afford to pay anything as they barely get a pension worth mentioning. We are having to pay towards our other house and trying to support our growing family!

We did initially see my parents house as a pension for when we were old but it's dropped so much and possibly more in the future!
I know this must seem rediculous to some people but I felt I had to somehow help my parents, I know it was a massive thing to do and honestly didn't give enough thought to it but just wanted to give my dad a break!

One of the main questions I need to know the answer to is, can my parents claim housing benefit to help us financially?
I have read "You may be excluded from Housing Benefit by this rule if you pay rent to a close relative who also lives in the home, or to a former partner for the home where you used to live together. It can apply if you pay rent to a company or trust that you have some connection with. It can also apply if you (or your partner) used to own the home and your ownership ended within the last five years." so if it is possible we can't do it for three years as they used to own it?

I'm sorry for the long post but I'm so scared ive made us bankrupt in an effort to save my parents?

SuzieSue

Sorry to hear about your situation (my OH did a similar thing to help his brother and he almost became bankrupt too, so I really feel for you).

Anyway, you really need to speak to the Housing Benefit people and explain the situation. Don't accept the first thing you are told as they are allowed to make exceptions and you should take it to a higher level.

G_M

You'd be better off asking on the benefits forum here.

Rocky99

Thank you so much for replying!

Kynthia

You're very unlikely to get any housing allowance for your parents living in your property. This is because you are only charging rent if they get benefits and not charging if they don't. This means it's a 'contrived tenancy' with the purpose of taking advantage of the housing benefit.

Have you been in contact with the Citizens Advice Bureau for debt advice, they may be able to help you.

[Deleted User]

I don't know your parent's situation exactly but have u looked at whether they are entitled to pension credits to increase their income?

It might also be worth visiting the Debt section of the forum and see if their debts can be better handled if they weren't cleared by the house purchase.

I would imagine (not knowing) that if your parents are short of cash, some of the decrease in value of their house could be due to a possible lack of maintenance/decorating etc. The decreasing value may not be quite as low as u think.

From other posts on here re renting to relatives, I think it is highly unlikely your parents will be able to claim housing benefit.., after all the house is owned by their close relatives (you and your husband), u haven't been charging rent, and they are still living there (I believe u have to establish that if they don't pay rent u will evict them to get housing benefit). As other's have said, check on the benefits part of the forum but I wouldn't hold your breath for the answer u need.

The other side of things (although unpleasant) is that you may have to evict your parents, so they can move to social housing (maybe). Then you could rent the house out. I'm afraid its the only thing I can think of.

I'd also suggest u go on the debt board yourselves, and see if you can cut your outgoings.

Rocky99

Hi thank you for your reply, I can see your point with this and for the past two years we have struggled to pay for everything but if we don't start receiving some kind of help we will end up ruined, aswell as my parents all for what at the time seemed the best solution. If this goes wrong my parents will end up having to rent somewhere and ask for benefits to aid them, it's just a matter of time :-( I just hope we don't have to forfeit our mortgage before this can happen

maginot

It is unlikely your parents woud get housing benefit.

First, as mentioned, you have not charged them rent and therefore would be considered a contrived tenancy.

Second, your parents had a £250,000 property which has been sold. They would be expected to use this money. If they have spent it all, it would be considered deprivation of capital and they would not be entitled to housing benefit. They would be expected to just keep paying the minimum payments of their debts, not pay it off in one go and then claim benefits.

What happened to the other £70,000 from the £150,000 you gave them?

bitsandpieces

Can you or your parents cut back on spending, to let you ease things and your parents contribute to your monthly expenses - at least in the short term? You might want to outline your spending on the Debt Free Wannabe board here, to see if people can make any suggestions.

Getting advice from CAB or one of the debt advice charities might be a good idea. Is any of the spare £70000 available?

Rocky99

thank you for your replies, my dad is very secretive man hence the level of debt he was in before we knew. To this day I'm not even sure if he told me the full extent and that there may have been more than I knew about. I think that he may have a small lump put away and I think it's more for the fact that when he dies he wants my mum to be ok. I think they may have been grazing from the money for day to day living as I do remember him saying that the incomings don't cover the out goings completly.

Bottom line is knowing my dad he won't contribute to the monthly as we didn't discuss anything (stupidly) at the time.

Another option I was thinking was if there was anywhere that might buy the house off me and allow parents to live there until death. But obviously the only incentive is the £50000 left in it for the buyer, if they existed?!

bitsandpieces

Rocky99 wrote: »

thank you for your replies, my dad is very secretive man hence the level of debt he was in before we knew. To this day I'm not even sure if he told me the full extent and that there may have been more than I knew about. I think that he may have a small lump put away and I think it's more for the fact that when he dies he wants my mum to be ok. I think they may have been grazing from the money for day to day living as I do remember him saying that the incomings don't cover the out goings completly.

Bottom line is knowing my dad he won't contribute to the monthly as we didn't discuss anything (stupidly) at the time.

Hard as it is, I think you'll likely need to have an open discussion with your parents. If your financial problems mean you may have no choice but to sell and evict them, they should know - and have the option to contribute - sooner rather than later. Also, the last thing you want is to find that your Dad has spent the £70000 - maybe even run up more debt - and needs more money for living expenses.

Another option I was thinking was if there was anywhere that might buy the house off me and allow parents to live there until death. But obviously the only incentive is the £50000 left in it for the buyer, if they existed?!

There are equity release companies. However, unless things have changed a lot, they'll be wanting well over £50,000 They also expect to deal with an elderly owner, of course...