benefits and mortgage

lld01

BigAunty wrote: »

Can I ask if you are able to produce a link to support this?

I'm not an expert in SMI so I'm not disputing it but would appreciate further info. I am surprised that there is a scheme that permits the public purse to continue paying the mortgage for a person at a new property from the outset.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/260301/dmg-vol4-ch23.pdf

Para 23475 contains the list of exceptions where mortgages used to purchase the home are allowable whilst taken out when in reciept of income based benefit. 23479 would apply in this case.

TOBRUK

ontiptoes wrote: »

I sold my house and bought a bungalow wile I was claiming benefits including SMI.
The mortgage company Nationwide and the DWP both agreed in principle before I sold up.
There were stipulations made by both, that the total mortgage was less than what I had been paying,(Less for dwp to pay out) the equity would be more ie a cheaper property,(more security for the mortgage) and that the reason for moving was approved, ie I kept falling down the stairs and needed to live on a single level.
Everything went through smoothly with no break in payments

As you ontiptoes, everything went through smoothly. Obviously I was a little worried by doing it and making the move, but I had no choice (like many others) but to look for somewhere more suitable that could be adapted to suit my needs.

Some may be against people like us having SMI payments, but this isn't very much (varies I know) in comparison to DWP helping with rent, I receive £20 a week.

ontiptoes

haha Yes it saves them A LOT of money, MONTHLY payment from them is just £49 against local HB allowed of £75 per week! They are quids in! lol

BigAunty

I believe it is the case that there are many less recipients of SMI versus HB (somewhere in the region of 230,000 versus 5 million HB claimants) and that the average claim is low, perhaps lower than HB. And it could be argued, it will cost the state purse much more in HB and homelessness costs if they don't stop people getting their properties repossessed.

Note, however, that nearly 100,000 of the recipients are claiming Pension Credit which means that due to the poor management of their private loan with a lender, nearly half of the recipients managed to retire without paying down the balance of their mortgage.

Though the sums are low, property price inflation means that some SMI recipients are able to sell their properties and buy a new one outright. In other words, taxpayers are propping up a personal investment, taking away the risk of repossession but not get a return on this support. Their relatives then inherit the properties.

Obviously the govt is on a slash and burn exercise to reduce public spending, including benefits.

They are looking at changing it, not just to make savings, but because they don't think SMI is fit for purpose and the govt believe that mortgages are a private matter, the safety net should be temporary and are querying why taxpayers are supporting people to pay off a personal loan when they could have taken out income/health protection policies. They didn't even rule out making the SMI replacement scheme a loan, placing a deed against the property to get the money back.

"In December 2011 the Government launched an “informal call for evidence” on proposals to reform SMI. Under the plans, SMI would be recouped via a charge on the property. SMI paid would be recouped on the death of the claimant or the sale of the property, but the claimant could also choose to pay off the charge at any point. The Government has not yet indicated how it intends to proceed in the light of responses received."

I am outlining this philosophy because anyone currently receiving SMI has to consider whether they will be booted off it in the future. Many SMI recipients have been receiving it in the long-term and have never had to consider drastic steps like selling up and moving to a smaller place, or selling up and moving into rental accommodation, using the equity they've gained to pay rent there.

See this briefing paper that may sound the death knell for SMI even if the recipients all think it is illogical that the taxpayer should pay HB instead of SMI for them. I think anyone on SMI now should be worried.

"The time-limit on payment of SMI to JSA customers is underpinned by the principle of providing short-term help through the benefits system. It is not considered appropriate that this help is provided indefinitely and it is important to be clear to customers on this from the start. The purpose of the time limiting is to ensure that there is an incentive for people to return to work.

Under the present system, people who have reached the age to qualify for and who are receiving Pension Credit and many disabled people may receive SMI indefinitely. They can either sell their property or potentially make profit from any equity that has built up over years or decades after SMI started, or leave the valuable capital asset to their heirs after death, with nothing paid back to the State for the help that was provided by way of SMI. This is unfair to taxpayers, many of whom are struggling to service their own mortgages or cannot afford to become owner occupiers.
36. In circumstances where people need long-term help with their mortgages because they are disabled or have retired with outstanding mortgage liabilities, the Government believes that it is not fair to pay SMI indefinitely without recouping some of the cost to taxpayers, through sharing in the asset gain to those individuals made possible by the support from the State."


http://www.parliament.uk/business/publications/research/briefing-papers/SN06618/support-for-mortgage-interest-scheme

ontiptoes

Yet they seem quite happy to subsidise landlords mortgages with inflated rental prices and they too gain from a rise in equity.
Are they also going to put a charge on their houses?

BigAunty

ontiptoes wrote: »

Yet they see quite happy to subsidise landlords mortgages with inflated rental prices and they too gain from a rise in equity.
Are they also going to put a charge on their houses?

Landlords pay tax on the rental of their properties and tax when they sell (Capital Gains Tax). A person receiving SMI who may benefit from property price inflation or providing an asset for their heirs does not repay it back in anyway.

The government have put caps onto Local Housing Allowance and changed the percentile from 50% to 30% which means they've reduced the number of properties available to those on HB from half to the bottom third of cheapest properties.

Therefore Landlords have been impacted by benefit payments and pay into the tax system.

But, yes, I agree the property market in the UK is a shambles caused by successive governments neglecting the housing market and not doing enough to protect tenants.