Owning 25% of property daughter has mortgage for remaing

Ballyboo

This is complicated sorry, in the process of selling my home that
Was joint mortgage with now my x husband, I am in receipt
Of income based ESA and lower rate of both components of DLA.
I havent had to pay council tax and I have had the mortgage interest
Paid since my husband left in 2010.
I am planning you use all my equity 25.000 for a deposit for my
Daughter (26) and myself and my daughter is going to get
A mortgage to borrow around 75.000, she is self employed.
My questions: would I still be able to get help to pay anything
Towards the mortgage interest or housing benefit as I only
Own 25% of the property?
Question 2: is it better not to be on the mortgage at all when
It comes to the benefit system, any guidance on this would be helpful.

BigAunty

You can't generally gift your capital to another party and claim means tested benefits like council tax, if this is your intention, after you transfer the capital to them.

This is a concept known as 'deprivation of capital', deliberately divesting yourself of capital (savings, property, investment, land, etc) in order to better position yourself to receive benefits or continue to receive them. The claimant is then treated as if they still have their capital, even though they don't own it any more, known as notional capital. Google for more info on this, plus look up historic threads on this matter on this forum.

However, if you are planning to simply buy the property with your daughter as a joint owner and live there, too, then this won't be deprivation as you haven't transferred the capital to her, you are still an owner occupier.

But in this case, what will you do if she decides to start a family and the place becomes too small,moves in a horrible boyfriend or you fall out? We see lots of threads on the housing forum where family members have fallen out over jointly owned properties, particularly when one wants to sell and the other doesn't. It's very risky to mix money and family.

What you can't do is gift her this 25k because it will cause a conflict with income based/means tested benefits. Also, if you aren't on the deeds or don't have any legal documents to cover it if it is intended as a loan to her, then you may have difficulty in recouping it in the future as it will be hard for you to prove it was loaned.

If you become a joint owner with your daughter, then from a legal (though not a benefit perspective) you are a joint owner - despite your 25% deposit towards the cost of the house, you are jointly and severally liable for the mortgage and if there are mortgage arrears in the future, the lender doesn't care who owns what share on a personal basis, they can pursue you for all of the debt.

Are you still a joint owner of the current property with your ex? If so, you will need them to consent to the sale. Many exes deliberately thwart the sale of properties. What is their share of this equity?

If you are a joint owner of the new property with your daughter then you will not qualify for any housing benefit if you are a owner, nor if you are not an owner either and just lodge there. This is because housing benefit is NEVER EVER paid to a tenant when they live in the same property as their landlord to whom they are closely related. In that situation, it is seen as a personal matter for the tenant to pay keep the landlord, their relative, out of their existing income.

If you are a joint owner at the new property, I don't know how it stands for you to receive SMI and get your mortgage paid (you won't get any HB at all). Your DLA will never be affected by any decision that you make.

I believe that you will probably still be eligible for income based ESA if you become a joint owner at the new property as owner-occupiers with equity in their sole property aren't treated as if they can realise the capital so it's not counted. If you deliberately deprive yourself of capital, I imagine this affects all income related benefits but do check the ESA position further.

Dunroamin

You'll be unable to get help with the mortgage interest as the mortgage won't be in your name and you won't get any help with rent because you're living with a close relative.

From a benefits point of view this won't be a good arrangement - sorry.

BigAunty

Also, have you checked yet with a lender whether you will be accepted onto a mortgage if your income consists solely of benefits? I don't actually know the position on this.

I know you are providing the deposit but don't know enough about the mortgage process to know how/if your income is considered or if you can be refused being accepted on the mortgage but appear on the deeds. Other posters may know.

I think if you sell a house and intend to buy a new one there might be a period of time in which the new savings that you bank which come from the equity is not included in any benefit calculations. Hopefully another poster can confirm if this is the case.

Here is some info on SMI that indicates you may hit problems claiming it at the new property but do speak to an expert on this, that joint income could be taken into account and SMI may not be granted if the mortgage is arranged after the claim (I'm assuming the new property would create a new SMI claim rather than continue as it's about trying to prevent a repossession so why would they grant it for a new property...!!).

"ISMI / SMI is aimed mainly at households where nobody is working so may not help if you have a joint mortgage and only one of you is unemployed. If you are unsure as to whether or not you will be eligible for help, seek advice from Support Network or another experienced adviser....If you took out your mortgage after you started claiming benefits, you may not be eligible."




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