Purchasing shared ownership when on benefits.

James1968

Asking on behalf of a friend.
His current situation -
Returned to live in his deceased parents house after early release on license from prison.
He is joint beneficiary with his sister.
House has been sold and the new buyer has allowed him to stay in house until mid-January .

He is due to receive a large inheritance.
Due to restrictions placed by the Police, he is finding it hard to find a property .

Now, i am looking for a buyer for my flat. With his inheritance, savings and by cashing in hi pensions he will be able to raise £110000 of the £120000 value of the property.
The shortfall would incur a rent whilst he raises the final £10k.
However, he is on benefits, so the question is 'will housing benefit cover the rent (£200 per month) until he finds work?.

HampshireH

It wouldn't be rent because he would own the house.

You would need to provide him a loan and I would strongly advise you do this through a solicitor. Or gift.

Shared ownership doesn't normally get paid monthly with the scales moving each month. How do you intend to write this into a purchase and who will pay the fees to update ownership etc? Your friend will have very little money unless he finds work.

Housing benefit or universal credit would pay for neither the loan or gift.

How will he afford the house once bought? Also his benefits will probably stop when he gets the inheritance (depending on what he is claiming) & he would be expected to pay his way so to speak.

I'm sure someone more in tune with the current benefit system will advise further.

To me you would be better dropping the price if you want to help your friend. But even then he would need to be speaking to the DWP to see if this was viable

[Deleted User]

I think he needs to find a smaller, easy to maintain property that he can afford. Or rent, paying 6 months rent (perhaps with you as a guarantor if you are his friend) until he finds a job, sorts himself out and establishes a new life.

I don't think the present idea is workable or to his advantage.

With the high rate of return to prison, he needs time to sort a life out before making long term decisions on what to do with his inheritance.

warby68

This seems a non starter for the friend when the situation is unstable and the purchase a real stretch.

Also, why would 'rent' on about 8% of the property be £200? That infers about £2400 for the flat as a whole which seems incredibly high.

Cashing in pensions to do it sounds questionable too. Or at least something for which advice needed.

[Deleted User]

This isn't shared ownership as in HTB shared ownership where a HA owns the rest of the property so he won't be able to claim HB/UC for the remainder of the balance.

He will need to use the inheritance to purchase somewhere though or he will have to start using it to fund himself instead of relying on benefits. Savings can be discounted from benefit calculations if it is to be used to purchase a residence for the claimant to live in.

I also think cashing in his pensions would be a mistake. It doesn't sound as if he will have the means to start saving for his retirement again. He could look into purchasing a HTB SO property although ideally, and I don't know if he will have the budget to do this, a freehold property outright because with little to no income I'm not sure how he would afford the management fees of a leasehold property.

AdrianC

The most sensible way to do this, if you really think you want to be involved, is for you to simply loan him the £10k shortfall with a charge against the property. Come up with whatever repayment structure you like, but get a solicitor to make sure everything's i-dotted-t-crossed.

James1968

Thank you. Loads of useful replies.
I am not in a position to act as a guarantor as i am on a DMP.

I now have a lot of thinking to do.

Also, he is on the SOR, so is restricted in where he can live.

AdrianC

James1968 wrote: »

Also, he is on the SOR, so is restricted in where he can live.

That alone suggests being an owner-occupier may not be a good plan. If the neighbours get wind, it's far more difficult to move.