Trying to mortgage whilst on benefits against an owned home to repay card debt

Westminster

This sounds like a DMP all day long. (I've been there and done that with giving up work to be full time carer with over 70k of unsecured at the time .... its all gone now thanks to the DMP and I managed to keep my house throughout)

Why give a credit card debt the potential to lose your house??

One tip I would give to myself if back in the same position, is to force all your creditors hands in issuing defaults ASAP (you do this by making token payments of £1 until they default you) as this will limit the damage to your credit file be effectively putting a 6 year limit for any adverse details to still be visible. If you don't 'rip off the plaster' in this respect, you could end up with fallout of this period impacting your credit file for many more than 6 years.

Regarding PIP - I believe it is possible to get an effective indefinite award. The wording on my wife's letter is "You are entitled to the Daily Living Component of PIP at the enhanced rate from XXX for an ongoing period"

Previously on DLA she used to have an end date (every 5 years after which we had to fill in the forms again).

Her ESA letters also make no mention of and end date.

Doshwaster

Harryp_24 wrote: »

I know this wasnt what you asked, but can you sell your house and downsize? it would be a lot better to downsize, pay off debts and live off the benefits then to secure the debts against your house which you would lose if you fail to pay.
I believe you would be better off doing what sammyjammy said and defaulting than securing the loans against your house.

Sounds like a good plan. Sell the house for £400k and buy somewhere smaller and easier to maintain for around £300k. Use the equity released to pay off debts and to give yourself a financial cushion until at least one of you can return to work.

newmortgageseeker

Thanks Doshwaster, Westminster and Harryp_24 for your replies.

All of your comments are very valid and certainly the prospect of DMP is looming for us.
Westminster, your first hand tips are appreciated on the topic.

Selling the house is a sensitive subject, but does always exist as an option.

This is the slightly upsetting part, basically substantial works and adaptations that were subsequently made to this home cost vastly more than budgeted and projected by my architect and the main contractor and in effect were probably a major contributor to the £30K on cards!

In effect the home is today fit for purpose, as-new and free from the likelihood of unexpected maintenance bills so swapping it now is not favoured as our first choice.

Westminster

Hindsight is a wonderful thing - but did you investigate a DFG?

We had substantial work completed on our previous property and the local council funded 25k of it.

So if you need anything else (with OT assessment) then you should defo pass the means testing now.

One thing I can assure you of though - which ever solution you go down, takling it head on will do wonders for your ability to sleep at night without worrying about phone calls and letters etc.

ACG

Completely agree, you are doing the right thing no matter which option you choose by looking at it well in advance.

You appear to have many options, a DMP could well cost you less but it will damage your credit report for years to come. But if you have no intention of trying to obtain credit in the forseable then it may not be the end of the world.

Best of luck.

newmortgageseeker

Hi Westminster and ACG

Looking back, everything looked easily achievable within our own financial capabilities and there was no immediate hint or sign that we would be where we are today.

We didn't investigate a DFG at the time, and in fact we didn't even reclaim any eligible VAT relief, we had other pressing concerns surrounding the immediate health issues. There were aspects of the works naturally that would have been out of scope for this help, but the final sum involved was staggeringly >£100K.

The DMP is going to be in sight on my radar, but we feel that we would like at least one crack at a mortgage (with all of the associated risks) the 64 thousand dollar question here is who is going to be best to try, for an applicant on a PIP award with carers and ESA.

Regards

rtho782

If you're willing to move, it's worth considering that you're not tied down by work now, and while your house might be very nice, I'd wager there are areas of the UK where you could get a much much nicer house for say £300k, pay off ALL your debt, have no debt payments, have £70k in cash, and live a much more comfortable life.

Obviously I don't know where you live now, but for example:

http://www.rightmove.co.uk/property-for-sale/property-63510146.html

newmortgageseeker

Hi rtho782

Absolutely beautiful house and as you say we could perhaps look at something similar and these financial concerns would quickly go away.

There were potentially other areas of the UK that we would certainly have considered moving to prior to all of this.

The difficulty we have at the moment is that we have had to position ourselves where there is expert medical care (in terms of major hospitals) pretty nearby. We have perhaps ten consultants or doctors who know the history and are involved in the care and so the thought of moving areas and health trusts would be nothing short of terrifying just at this time.

In addition to this we have close family within minutes and this is a very welcome support during the toughest times.

minimike2

My 2p...

I cannot offer advice on your case as an individual, but with these generic circumstances there is no way I would expect any mortgage advisor to recommend a mortgage to someone with this situation for the purposes of consolidating debt. I simply cannot see how anyone would put their name to a recommendation which puts the home at risk of someone with serious long term health issues when there are other ways to approach it.

You already own your house outright, you have a modest income which is sufficient to "live off", well, more than live off, especially oop narrf.

There have already been some good suggestions in this thread so I won't add any more. Best of luck to you both.

I also assume given there was no mortgage that you haven't any protection policies in place which you could retrospectively claim on? Sounds daft but some people do forget about them. I once saw a client who had cancer 4 year before me meeting them and they didn't claim on their CIC because they didn't think they could because they survived.... The claim was paid and 4 years premiums refunded. Worth a look to make sure you didn't have anything still kicking about.

newmortgageseeker

Hi Minimike2,

Thank you for your comments.

Unfortunately in our own situation, there are absolutely no protection policies in place that would help us. As you most rightly say, that would be a fantastic dusty piece of paper to find in the bottom of a drawer.

These replies seem to be stacking up towards a forum vote for a DMP strategy, which wasn't even on our radar at the time of opening the posting.

Putting aside what might appear to be common sense and the benefit of trade advice given above.
We still have a moral conscience towards the lenders and I am uncomfortable, given my age, at the prospects of destroying any credit score for the sake of an amount such as £30K.

I understand that even with a DMP, lenders do not necessarily have to engage with the process and can still add additional charges if "their" expected payments are not met and also pursue independent debt recovery which we cannot every allow to happen.

If we felt that there was and would continue to always be more than adequate scope within our means to meet the demands of a modest £30k mortgage, but obviously not enough to service card borrowing. Do you believe that every responsible lender would refuse to entertain our proposal, even if for example it was one who had £12K of the card debt, that would then be affected by a DMP if we were to go down that route?

I am certainly going to speak with StepChange to seek their advice.