Benefits advice please.. Thanks!

bradders33

Hi all,

Hope you are all well?

Need some advice please.. Earlier on in the year my mum spent an unexpected long spell in hospital, as a result she now has mobility problems and is struggling with her home, as her house is an "upside down house" with only her kitchen downstairs and she was struggling with the stairs mainly.

When she was released from hospital, the occupational health people came out and made adaptations to her home to help her, but to be honest she needed to face facts and get accommodation on one floor.

Anyhow, she has been offered a ground floor place in sheltered accommodation, which she is over the moon with, but oddly, nobody has said that it was on the proviso that she sells her little house.

Getting to the point, my brother needs somewhere to live and there has been discussion of him taking over my mum's house, however, he cannot buy it off her as he is a contractor and due to the nature of his work and his salary he wouldn't get a mortgage, despite being able to afford the repayments and the rental payments on the rest of the share too.

So, he asked if he could move in to the house and pay mum money to pay the mortgage and rent each month. My mum would like this as she hasn't got any money, no savings and due to her health she has no life insurance and has been unable to work for 5 years, she has nothing but this house, so she would like to keep the house (for the little it is worth) so she has something to leave to myself and my brother one day when she's no longer here.

But, and its a big but.. If she effectively "rents" it out to my brother would it effect her ESA, housing benefit and council tax benefit? Even if what he pays is just covering the cost of keeping the house, so she isn't making profit on it.

Likewise, if she sells up and wants to put what little equity she has away for us for when she is gone, will that affect her benefits?

It's such a minefield and my mum wants to do what is right. My brother is currently dossing at his in-laws, whilst his wife studies at uni, so would be nice if he got to move in to an affordable home, rather than an over-priced rental property or dossing with the in-laws!

Any advice gratefully received. Thanks very much.

Caz3121

how much equity is in her house?

She may not be entitled to means tested benefits at all (eg housing benefit)

Jobseeeker

she probably wont be able to get housing benefit. (unless the house is in negative equity)

she could rent it to her son and wife at a profit and use that to pay her rent

how many years left on her mortgage

bradders33

Caz3121 wrote: »

how much equity is in her house?

She may not be entitled to means tested benefits at all (eg housing benefit)

Hello, I am not sure actually, I will have to find out from her, maybe £10k, if that.

Do you know how keeping the house would affect the means tested benefit? Especially if she is not gaining an income from it? Thanks.

bradders33

Jobseeeker wrote: »

she probably wont be able to get housing benefit. (unless the house is in negative equity)

she could rent it to her son and wife at a profit and use that to pay her rent

how many years left on her mortgage

Hmmm, that's not a bad idea you know, I am unsure how much her HB is, but I imagine that if she even rented it for a small profit that replaced her HB that could work, it would still potentially be a LOT cheaper than what he'd pay with a private landlord. Interesting, food for thought. Thank you.

Mort, not sure, 12 years perhaps? I really should have all thsi information, sorry!

princessdon

She would be assessed on income and capital. The rent you brother pays less any interest mortgage payments and allowable costs will be treat as income. She would also need permission from her mortgage to rent out and they may change her onto a higher rate. She also needs safety certificates and do a self assessment return. Any profit after interest of mortgage and buildings insurance is her income used to assess benefits.

As she owns a house she doesn't live in, they will look at capital. Get 3 valuation from estate agents and take away any mortgage (not loans secured on property), this value of capital will then affect her benefits. Between 6 and 16000 it is tapered, under 6 unaffected, over 16k no benefits.

The income and capital will determine her entitlement.

How old is she?

Is her ESA contribution or income based?

bradders33

princessdon wrote: »

She would be assessed on income and capital. The rent you brother pays less any interest mortgage payments and allowable costs will be treat as income. She would also need permission from her mortgage to rent out and they may change her onto a higher rate. She also needs safety certificates and do a self assessment return. Any profit after interest of mortgage and buildings insurance is her income used to assess benefits.

As she owns a house she doesn't live in, they will look at capital. Get 3 valuation from estate agents and take away any mortgage (not loans secured on property), this value of capital will then affect her benefits. Between 6 and 16000 it is tapered, under 6 unaffected, over 16k no benefits.

The income and capital will determine her entitlement.

How old is she?

Is her ESA contribution or income based?

Thanks for this, gives us something to look in to further.

She's 58, I have no idea which ESA she has, she doesn't work and hasn't worked for 5 years due to her health, but she worked for 35 years prior to that, if that helps?

princessdon

bradders33 wrote: »

Thanks for this, gives us something to look in to further.

She's 58, I have no idea which ESA she has, she doesn't work and hasn't worked for 5 years due to her health, but she worked for 35 years prior to that, if that helps?

Ok, in a few years she can claim pension and pension credit. This means higher savings allowances and full rent/council tax paid.

She is on ESA income, so yes savings, income from rental etc. if say 10k equity (less the disregard for selling costs) then this would only affect benefits slightly, if no profit from rental, most benefits can be paid.

You need to assess the capital and potential income before people can advise really.

Also is she claiming DLA?

zzzLazyDaisy

Is this a shared ownership house? (You mentioned rent on the other share). If so almost certainly there will be a clause against sub-letting, so once she moves out she will have to leave it standing empty or sell.

But in any case, capital assets are counted for means tested benefits purposes, and the fact that she owns this house will probably put her over the capital limit anyway, but you need to check this out.

Even if you get past both those two hurdles, she will need permission from the lender to let the property, she will have to comply with landlord legislation, and she will have to declare the rental income for tax purposes. She can deduct from the rental income mortgage interest, and any necessary expenses associated with the house, but she will pay tax on the rest. She cannot offset her personal allowance against this as it is investment income, not earned income (but in any case, as ESA is taxable, this uses up most of her personal allowance anyway).

With regard to housing benefit - it always used to be that they ignored the mortgage on a second home as they don't take debts into account, so the whole of the rent after tax would be taken into account. But you'd need to check that.

I realise that she probably does want to help your brother, but it may be much better for her to sell the place and use the equity to make her home and her life more comfortable.

These are just general comments, as without full facts it is impossible to give any detailed info. But it may give you a starting point.

bradders33

princessdon wrote: »

Ok, in a few years she can claim pension and pension credit. This means higher savings allowances and full rent/council tax paid.

She is on ESA income, so yes savings, income from rental etc. if say 10k equity (less the disregard for selling costs) then this would only affect benefits slightly, if no profit from rental, most benefits can be paid.

You need to assess the capital and potential income before people can advise really.

Also is she claiming DLA?

Okay, thank you.

No, she is not on DLA, she did apply after coming out of hospital, but was declined, she appealed and was declined again. :rollseyes: