Proposal for father to purchase council house - how will it impact benefits

elsien

F70 said:

It is a very good way to maximise inheritance. Where else would you see at least 50% return investment in 5 years? 

Also protects against care home fees if over 7 years. 

Condition and age is everything though. 35k seems very cheap even with discount.

There is no seven-year rule with regards to care home fees. Local authorities can go back further than that to investigate potential deliberate deprivation of assets.

Brie

I honestly can't see any winners in this situation.  If father is accused of deprivation of assets for "giving away" the price of the house then the couple living there may well be told they need to sell to pay for father's care.  Also maintenance is an issue as other have mentioned.  Father may be willing to step in and help but what about when he can't?  If he's gone into care or someone needs to deal with his finances due to dementia etc then maintaining someone else's house would not be considered in his best interest as it's not what his money should be used for and that could cause a big issue with the council, other family members etc.  

sammyjammy

So the expectation is that the house can be bought outright for £35k?  Seems very unlikely,   Have they actually got a cost from housing association?

elsien

slowcars said:

elsien said:

What is the benefit to the couple in question of becoming homeowners. It gives them increased costs when they already have a secure tenancy anyway. So what are they trying to achieve,  other than presumably an asset that is worth a lot more to someone else when they pass away?

Yes there are ongoing costs with owning your home - repairs, renewals etc. but what you have not mentioned is that owning a property under the right to buy scheme would mean that in say 5 year's time not only would the property increase in value but that the discount when bought would not be repayable to the council - win win .

We did this in 1985 and bought our property for £18,000 after a 50% (I think) discount. We moved out into another property in 1990 when I could afford to take out a bigger mortgage and rented the old house out for 6 years to provide a better income. We then disposed of it 1997 for £238,000. After paying off the original mortgage it left us with approx £229,000 which we used to pay off the second property. Living in a council house up until 1984 then mortgage free when I was 47 can't be bad 

The difference between you and the people in the OP is that they are not working and are reliant on benefits to live due to disability. So the chances of getting a mortgage and moving up the housing ladder as things stand are very small. And owning a second home that they were not living in would end any entitlement means tested benefits. Your situations are not comparable.

So other than incurring extra costs for maintenance I’m going to go back to my original question of what actually do they gain from it? If they don’t want or can’t afford to sell up to move elsewhere than any paper gain is irrelevant to them. 

calcotti

sammyjammy said:

So the expectation is that the house can be bought outright for £35k?  Seems very unlikely,   Have they actually got a cost from housing association?

With a right to buy discount, in some areas of the country I guess that’s possible.

kinksfan

Sheramber....what is SDLT in this context. And yes the aim is for the couple to pass the house onto their kids in their will (both of whom have left home). It seems hopeful that no-one is challenging idea that the main negative impact on benefits is the removal of the housing benefit (quite rightly) and ask you say the extra costs of insurance and maintenance. Is there still places like citizens advice to approach on these matters or have these been mothballed by this government.

MalMonroe

Hi, SDLT is Stamp Duty Land Tax, information in the following link - https://www.gov.uk/stamp-duty-land-tax

I am also in the position of thinking about buying my council property and would also need £35k. The estimated cost of my flat is £120,000 or thereabouts and because I have lived here for 16 years I'm entitled to the maximum discount - outside of London. 

I would want to buy with my daughter and obviously it will be hers to do with as she wishes eventually.

I think your relative could do worse than have a chat with someone at the council who is involved with Right to Buy. You DO have to think about things like repairs and extra costs, etc. and make decisions on what is right and best for you. And also maybe another chat with DWP? Nobody has to say it's a done deal or firm arrangement as yet. Just that they are making initial enquiries, with no obligation requested.

As long as everyone involved is open and honest about what may happen (although not yet a done deal), I think it's a great opportunity for your relatives. There's always talk about 'deprivation of assets', etc and so on but not everyone needs to go into care at the end of their life (in fact I shall fight with every fibre of my being against such a thing!) and if being wary of that stops people sharing money and taking action which could be very beneficial for them or others, I think that's a big shame. 

There's a lot of information from this very site in the following link (updated last month) and it might be helpful for your relatives.

https://www.moneysavingexpert.com/mortgages/right-to-buy/

MalMonroe

calcotti said:

sammyjammy said:

So the expectation is that the house can be bought outright for £35k?  Seems very unlikely,   Have they actually got a cost from housing association?

With a right to buy discount, in some areas of the country I guess that’s possible.

It is very possible. I'm going to apply to do it anyway!

freesha

And another property taken out of the social housing stock.....

slowcars

Alice_Holt said:

slowcars said:

elsien said:

What is the benefit to the couple in question of becoming homeowners. It gives them increased costs when they already have a secure tenancy anyway. So what are they trying to achieve,  other than presumably an asset that is worth a lot more to someone else when they pass away

We did this in 1985 and bought our property for £18,000 after a 50% (I think) discount. We moved out into another property in 1990 when I could afford to take out a bigger mortgage and rented the old house out for 6 years to provide a better income. We then disposed of it 1997 for £238,000. After paying off the original mortgage it left us with approx £229,000 which we used to pay off the second property. Living in a council house up until 1984 then mortgage free when I was 47 can't be bad 

      If you had two properties, with one rented out and one your main residence - then, on sale, you would have had a capital gains liability on the property you rented out.

     In 1997 the capital gains on a potential £220k profit would have been substantial (even taking into account indexing and the years when this was your main residence), as the capital gain was aligned with income tax rates (up to 40%).  
Did you not declare or settle your CGT on your second property?   

Honestly have no idea. An accountant friend did all of that when completing the tax returns. He handled all of the financial matters and between him and the solicitors they dealt with all of the legal paperwork. All I remember is that the proceeds just about covered the mortgage debt and costs.
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