Universal credits and mortgage overpayments

livingwithinmymeans

Hi,

I just had a question about universal credits and mortgage overpayments.

We currently have some savings due to some money we inherited and are going to be making extra monthly payments on our mortgage.

However I've been reading just recently about universal credits and how any savings you have are treated as they are under other benefits with the 6k and 16k thresholds.

Will overpaying our mortgage now, as in 2013, be seen as deprivation of capital?

Horseunderwater

You need to check that the lender will allow this - some agreements only allow an extra 10% per year to be paid as extra towards the mortgage - my current one certainly does. And yes DWP may well class it as deprivation. However if you have arrears, then you could clear those and you are allowed to clear the credit card that has the highest interest rate I believe. But to avoid the problem you need to spend the money on essential bills and stuff that you need - so if for example your washing machine was on its last legs - that would be allowed, but you could not just upgrade for the sake of doing so if that makes sense. Am sure that others will be along to clarify it all more.

SkyeKnight

Horseunderwater wrote: »

But to avoid the problem you need to spend the money on essential bills and stuff that you need - so if for example your washing machine was on its last legs - that would be allowed, but you could not just upgrade for the sake of doing so if that makes sense. Am sure that others will be along to clarify it all more.

That's the rules for claiming income based JSA, housing benefit etc, but people currently claiming Tax Credits can be hugely better off than that. For example if you have 3 children you could be earning almost £38k a year - you are hardly going to be spending all your money on essentials only.

Deprivation of capital could get really complicated under UC since they are now means testing a benefit given to people who do and will spend money on luxuries. I've no idea how they plan to police this!

Pedent

For reference, here's what the draft legislation says:

(2) A person is not to be treated as depriving themselves of capital if the person disposes of it for the purposes of—

(a)reducing or paying a debt owed by the person; or
(b)purchasing goods or services if the expenditure was reasonable in the circumstances of the person’s case.

http://www.legislation.gov.uk/ukdsi/2013/9780111531938/regulation/50

As overpaying a mortgage is "reducing or paying a debt owed by the person", it looks to me as though it's allowed.

SkyeKnight

Pedent wrote: »

As overpaying a mortgage is "reducing or paying a debt owed by the person", it looks to me as though it's allowed.

Though that tends to be interpreted as debts "owed right now" rather than "owed over the next 25 years"...

sammyjammy

OP doesn't say which benefits they are claiming, if its Working tax credits/child tax credits only then it won't currently be an issue. Universal credit doesn't even start coming in for WTC/CTC only claimants until April 2014. Anything they do with their money now is up to them and won't be looked at as Deprivation of capital, now if they did it a month before their claim was moved over that's a different matter.

livingwithinmymeans

Thank you for your replies, yes we only receive CTC. I just don't want to do anything that will cause problems later