Mortgage overpayment - UC - deprivation of capital

System

This discussion was created from comments split from: UC Managed Migration and Capital (Savings)?.

Adam1988123

calcotti said:

justwhat said:

You should be able to pay off debt and repair your house/extend. As long as these things are considered reasonable.

There is no test of whether or not it is reasonable for paying off debt under UC. The regulations specifically state taht paying off debt can never be treated as deprivation of capital.

ElwoodBlues said:

Paying down a chunk of the mortgage?

As a result of the above paying off part of your mortgage can not be treated as deprivation of capital under UC.

justwhat said:

Really you want UC if you can get it AND stay on WTC/CTC for as long as possible.  

You can't get both UC and WTC.CTC. A claim for UC immediately terminates WTC/CTC.

Tax Credits have always been an anomaly in the benefits system. All other means tested benefits have always taken capital into account with some disregard below the threshold. Unfortunately the real terms value of the disregard has reduced significantly over the years because he £16,000 threshold was set a long time ago (can't remember when and can't be bothered to look it up now).

We made overpayment towards our mortgage in order to reduce our debt but UC classed it as deprivation of capital. We moved to UC via Managed Migration and declared the saving during the application process. Any advice please?  

poppy12345

Adam1988123 said:

calcotti said:

justwhat said:

You should be able to pay off debt and repair your house/extend. As long as these things are considered reasonable.

There is no test of whether or not it is reasonable for paying off debt under UC. The regulations specifically state taht paying off debt can never be treated as deprivation of capital.

ElwoodBlues said:

Paying down a chunk of the mortgage?

As a result of the above paying off part of your mortgage can not be treated as deprivation of capital under UC.

justwhat said:

Really you want UC if you can get it AND stay on WTC/CTC for as long as possible.  

You can't get both UC and WTC.CTC. A claim for UC immediately terminates WTC/CTC.

Tax Credits have always been an anomaly in the benefits system. All other means tested benefits have always taken capital into account with some disregard below the threshold. Unfortunately the real terms value of the disregard has reduced significantly over the years because he £16,000 threshold was set a long time ago (can't remember when and can't be bothered to look it up now).

We made overpayment towards our mortgage in order to reduce our debt but UC classed it as deprivation of capital. We moved to UC via Managed Migration and declared the saving during the application process. Any advice please?  

This thread is more than 1 year old. Please start your own thread with your question because it will save a lot of confusion. 

MSE_ForumTeam5

We've split this into its own thread

Tommy_77723

I'd be interested in understanding this further, if anyone had any knowledge/experience.

8dayweek

What does your Decision letter say specifically? 

Everyone goes on about Deprivation of Capital - and it is a thing DWP look at - but on UC it’s actually very difficult to prove because paying off Debt under UC is, on the whole, allowed. 

When you updated the change to your Capital, did you put anything in that Journal to explain, or did you go into the Jobcentre to provide the details?

HillStreetBlues

OP
You need to to post fully everything that has happened and all responses, the snippet you have given means we are unable to help.

Spoonie_Turtle

8dayweek said:

What does your Decision letter say specifically? 

Everyone goes on about Deprivation of Capital - and it is a thing DWP look at - but on UC it’s actually very difficult to prove because paying off Debt under UC is, on the whole, allowed. 

When you updated the change to your Capital, did you put anything in that Journal to explain, or did you go into the Jobcentre to provide the details?

It explicitly cannot be considered DoC if it's paying off debt, according to the legislation. 

The only grey area would be if there's doubt the debt existed, e.g. an informal loan between friends/family with no proof.  Which is extremely unlikely to be the case with a mortgage.

8dayweek

Spoonie_Turtle said:

8dayweek said:

What does your Decision letter say specifically? 

Everyone goes on about Deprivation of Capital - and it is a thing DWP look at - but on UC it’s actually very difficult to prove because paying off Debt under UC is, on the whole, allowed. 

When you updated the change to your Capital, did you put anything in that Journal to explain, or did you go into the Jobcentre to provide the details?

It explicitly cannot be considered DoC if it's paying off debt, according to the legislation. 

The only grey area would be if there's doubt the debt existed, e.g. an informal loan between friends/family with no proof.  Which is extremely unlikely to be the case with a mortgage.

I do think there’s a bit more nuance there. 

Paying off your mortgage as you’ve received an inheritance vs. Sitting on over 16k capital for a considerable amount of time, and making an overpayment (but not actually clearing the debt fully) are two different scenarios. 

I would think OP would ideally need to show a pattern of saving up and overpaying lumps off the mortgage, or if the overpayment they’ve made reduces their ongoing monthly payments (i.e. reducing their outgoings).

It’s all rather moot if they’ve stuck a journal message in saying “we did it because if not we won’t get UC at the end of the 12 month transition period” though. 

kaMelo

There is no nuance, under UC paying down (or clearing completely) a legitimate debt is never considered deprivation of capital.

The only debate to be had is whether a debt is a legitimate, documented debt. A mortgage clearly is, paying back a friend or family member could be more problematic.

peteuk

kaMelo said:

There is no nuance, under UC paying down (or clearing completely) a legitimate debt is never considered deprivation of capital.

The only debate to be had is whether a debt is a legitimate, documented debt. A mortgage clearly is, paying back a friend or family member could be more problematic.

But surly theres the optics of youve sat on over £16K for two years, but only now your paying off your mortgage. I know its personal choice and previously you could argue the interest rate was so good that £16K in a high interest account was potentially better than paying of a low interest (fixed) mortgage.  But still even though paying off debt is not DoC, something like this is likely to attract the question.