Equity release & UC

andrew71

We've been discussing about taking Equity Release on our home. We want to do some repairs on the home and possibly extending. I receive Universal Credit (income related). If we did take E.R. out for just the amount we need (eg £15,000) would this affect/effect (never know which is correct) our benefits as the money would not be saved?

HillStreetBlues

andrew71 said:

affect/effect (never know which is correct)

I use Affect is for Action, Effect is for End result, so as you are looking for end result it's effect, or so I believe.

As for the main question, I'll let the experts help you there or is it their or they're? (joke)

calcotti

I think this applies

You would need to declare any capital obtained and a Decision Maker would have to decide whether or not this disregard applies. 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1085956/admh2.pdf#page23

H2123 Where, in the past 6 months, a person has acquired a sum of money by way of a loan, grant or otherwise which is to be used for making essential repairs or alterations to premises occupied or intended to be occupied as the person’s home, that amount can be disregarded from the calculation of that person’s capital but only where it is used for that purpose.

H2124 The DM may decide it is reasonable to disregard the grant, loan or otherwise for a longer period if the repairs and alterations will take more than 6 months.. 

tifo

It will probably be ignored as it's a loan secured on your home, just like a mortgage is ignored. I've not seen any guidance on loans and UC so others will be able to tell you more.

poppy12345

tifo said:

I've not seen any guidance on loans and UC so others will be able to tell you more.

Calcotti posted a link...

calcotti

tifo said:

It will probably be ignored as it's a loan secured on your home, just like a mortgage is ignored. I've not seen any guidance on loans and UC so others will be able to tell you more.

I don’t understand what you mean by a mortgage being ignored. People don’t generally ever have the capital from a mortgage.

I am not aware of any rules about capital resulting from a loan being secured against your home being ignored.

RobinHill

HillStreetBlues: The topic here is the benefit being impacted upon. Therefore the word to use is "affect". Effect is the act of putting something into action. So by means of a relevant example ... the effect of any Equity Release may affect the individual's benefit award, or the effect of the vaccine may prevent people becoming affected by the virus.

NedS

calcotti said:

tifo said:

It will probably be ignored as it's a loan secured on your home, just like a mortgage is ignored. I've not seen any guidance on loans and UC so others will be able to tell you more.

I don’t understand what you mean by a mortgage being ignored. People don’t generally ever have the capital from a mortgage.

The 'capital' (or asset) from the mortgage loan is the property, which is fully disregarded if it is being lived in as the primary residence by the claimant.

calcotti said:

I am not aware of any rules about capital resulting from a loan being secured against your home being ignored.

If the property did not fall to be disregard (for example, as a second home), then any loans secured against the property would be taken into account when calculating the capital value for UC.

That said, once the equity release is received, it must be declared, and then consideration can be given by a Decision Maker as per the guidance you posted above.

calcotti

Exactly, the loan isn’t ignored (regardless of how it is secured). If the asset itself is the lived in home that is disregarded. Any money arising from the loan is by default taken into account. It is up to a Decision Maker to decide if a disregard applies (such as the one I highlighted).

OP, I would suggest you have some evidence of seeking quotations or some evidence that you are proposing the works prior to getting the equity release.

tifo

NedS said:

If the property did not fall to be disregard (for example, as a second home), then any loans secured against the property would be taken into account when calculating the capital value for UC.

That said, once the equity release is received, it must be declared, and then consideration can be given by a Decision Maker as per the guidance you posted above.

I didn't think they took this kind of debt into account which is what the equity loan is, a debt secured against the home equity and repayable upon death. That's why to me it seems the same as a mortgage which is also a debt secured against the home and repayable over a time period.

When you have capital then that's yours, you don't need to repay it back to someone so it will be used in UC calculations.

calcotti

When the loan is received it will be capital. 

It would however, if a secured loan, be taken into account when valuing the asset against which it secured