Benefits entitlement --- Can I deduct unpaid debt from the declared savings?

zagfles

kaya wrote: »

Maybe I can deduct all my future mortgage repayments from my savings then :-)

You can, if you have a flexible mortgage. Just overpay your mortgage with your savings. Though it might be viewed as deprivation if you do it while claiming benefits!

It's generally daft to build up savings in the first when you have a mortgage - just get a flexible mortgage and overpay instead of saving - you can withdraw the overpayments if you need to, you won't pay any tax on savings interest (you save interest on your mortgage instead) and you have no actual savings if you ever need to claim benefits.

Housing_Benefit_Officer

You are either a beneficial owner of the capital with a legal right to it now or in the future or you are not.

The O/P is the beneficial owner of the capital.

Outstanding debts are not deducted from your capital.

You either pay your debt so you are no longer the beneficial owner of the capital or you don't.

If a claimant had 2 bank accounts - 1 account had £20,000 in it and the other had an overdraft of £10,000 and the claimant also had credit card arrears of £10,000 then the claimant is treated as having the beneficial ownership of £20,000 capital. We don't deduct the overdraft or the credit card arrears from their capital.

If the claimant paid their overdraft and their credit card arrears then they are treated as no longer being the beneficial owner of £20,000 and that they have nil capital. Doing that could open up an investigation of deprivation of capital however.

For benefit purposes the O/Ps debts are not deducted from their capital unless they pay off those debts.

rogerblack

Housing_Benefit_Officer wrote: »

For benefit purposes the O/Ps debts are not deducted from their capital unless they pay off those debts.

I believe the only time this may not be true, for 'normal' debts, is if the debt and the savings are in one bank, where the bank has the right to offset, and can in principle take the money for the debt at any time.
Is this correct?

BigAunty

jlawrence wrote: »

Hi I should hope that you can't!! I'm in a similar boat with an interest only £100,000 mortgage and £100,000 on deposit with the same bank as it was a condition of the mortgage. The debt is due to be repaid in 2020.
.

Are you in the position to switch to a repayment mortgage?

Can you outline why the lender insisted you had a deposit of 100k in order to qualify for a 100k mortgage or why you took out a mortgage when you could have bought the property outright or was the loan bigger at the outset? I don't understand that arrangement - a 10% deposit and sufficient income to loan ratio is the usual criteria....

Housing_Benefit_Officer

rogerblack wrote: »

I believe the only time this may not be true, for 'normal' debts, is if the debt and the savings are in one bank, where the bank has the right to offset, and can in principle take the money for the debt at any time.
Is this correct?

If the claimant has the beneficial use of £20,000 then they have the beneficial use of £20,000. Debts owed to the same bank are not deducted from the capital amount. If they have overdrafts and credit card arrears unless they physically pay off these debts then their full amount is taken in to account. It isn't for the DWP or Local Authorities to on paper pay off peoples debts to reduce their capital.

rogerblack

Housing_Benefit_Officer wrote: »

If the claimant has the beneficial use of £20,000 then they have the beneficial use of £20,000. Debts owed to the same bank are not deducted from the capital amount. If they have overdrafts and credit card arrears unless they physically pay off these debts then their full amount is taken in to account. It isn't for the DWP or Local Authorities to on paper pay off peoples debts to reduce their capital.

Ah - some googling reveals I was thinking of:
http://www.administrativeappeals.tribunals.gov.uk/aspx/view.aspx?id=3196

the documents produced to the Upper Tribunal clearly showed that the agreement between the claimant and the bank conferred a contractual right on the bank as creditor to debit at any time without prior notice any of a customer’s accounts with it which were in credit with funds sufficient to reduce or repay any indebtedness which that customer might have to the bank (paragraph 15); 3. the “market value” of the balance in the Bonus Saver account was its net value after deduction of the amount of the claimant’s overdraft in his Student Additions account. Thus for the purposes of regulation 111, at the relevant time the market value of the claimant’s Bonus Saver account was £5,705.19 and no tariff income was applicable to the claimant in the calculation of his entitlement to income-based jobseeker’s allowance

The exact terms and conditions are important - if the bank has the right to offset at any time, then it may well apply.

If they cannot do this until some time in the future, when the debt comes due, it would not.
(This ruling only applies to JSA directly, though it may also apply to other benefits if the legislative underpinnings are the same)

Housing_Benefit_Officer

rogerblack wrote: »

Ah - some googling reveals I was thinking of:
http://www.administrativeappeals.tribunals.gov.uk/aspx/view.aspx?id=3196


The exact terms and conditions are important - if the bank has the right to offset at any time, then it may well apply.

If they cannot do this until some time in the future, when the debt comes due, it would not.
(This ruling only applies to JSA directly, though it may also apply to other benefits if the legislative underpinnings are the same)

There is nothing in Housing Benefit legislation that I am aware of saying we can do this! And why didn't the claimant who won his appeal just pay the debt off from the other account rather than go through several lengthy appeals while receiving no JSA?

Mojisola

BigAunty wrote: »

Can you outline why the lender insisted you had a deposit of 100k in order to qualify for a 100k mortgage or why you took out a mortgage when you could have bought the property outright or was the loan bigger at the outset? I don't understand that arrangement - a 10% deposit and sufficient income to loan ratio is the usual criteria....

jlawrence took financial advice from an estate agent -
https://forums.moneysavingexpert.com/discussion/comment/65901694#Comment_65901694
Post 23
"I was advised by the estate agent that sold us the property to take out a mortgage and use the cash as security along with the bungalow. We don't pay any interest on the mortgage as the cash deposit they hold offsets the mortgage."

rogerblack

Housing_Benefit_Officer wrote: »

There is nothing in Housing Benefit legislation that I am aware of saying we can do this! And why didn't the claimant who won his appeal just pay the debt off from the other account rather than go through several lengthy appeals while receiving no JSA?

There is no mention of it in the JSA legislation either.
The law is both legislation, and caselaw that interprets it.
You can't read the one without the other and get the complete picture.

jlawrence

BigAunty wrote: »

Are you in the position to switch to a repayment mortgage?

Can you outline why the lender insisted you had a deposit of 100k in order to qualify for a 100k mortgage or why you took out a mortgage when you could have bought the property outright or was the loan bigger at the outset? I don't understand that arrangement - a 10% deposit and sufficient income to loan ratio is the usual criteria....

Hi, with no income coming in and now starting to live off the deposit of £100,000?
The bank insisted as it was clear from the outset that we would not be in a position to repay the loan out of income in 2020. They therefore insisted that we deposit enough that would repay it in 2020. The advantage was also that there were no repayments or interest charges on the mortgage. I believe that the bank assumed that we would find a source of income to live off and not need to touch that capital. They assumed incorrectly as we can't claim any means tested benefits because of the money the bank is holding. Yes we could have paid the full price with no mortgage, but were advised not to. Our combined income at the time would not have allowed us to borrow anything like the £100,000.