Buying shared ownership with universal credit

Meatymonster

Hi I'm getting divorced, I will be staying in the main property, we jointly own a buy to let property which we will sell giving my wife 50k deposit that she would like to put towards a shared ownership property. Have worked out based on the property cost she would be entitled to univeral credit and with that and her wages she would easily afford the monthly cost. Greatful for help on a few questions please:

1. Does the mortgage eligibiity take into account the universal credit amount? The calculators I have seen don't have a section for univeral credit 

2. Chicken and egg, how does it work, does she need to be claiming the universal credit first in order to get the mortgage? Also vice versa, does she need to be in the property to claim the UC? We really need them to happen simultaneously ie she buys the place and the UC credit kicks in straight away

3. Does the mortage only come from a specialist bank or any?

4. Is there some kind of specialist advisor she needs to speak to?

Thanks

marcia_

Meatymonster said:

Hi I'm getting divorced, I will be staying in the main property, we jointly own a buy to let property which we will sell giving my wife 50k deposit that she would like to put towards a shared ownership property. Have worked out based on the property cost she would be entitled to univeral credit and with that and her wages she would easily afford the monthly cost. Greatful for help on a few questions please:

1. Does the mortgage eligibiity take into account the universal credit amount? The calculators I have seen don't have a section for univeral credit 

2. Chicken and egg, how does it work, does she need to be claiming the universal credit first in order to get the mortgage? Also vice versa, does she need to be in the property to claim the UC? We really need them to happen simultaneously ie she buys the place and the UC credit kicks in straight away

3. Does the mortage only come from a specialist bank or any?

4. Is there some kind of specialist advisor she needs to speak to?

Thanks

 No bank will assess possible future benefit entitlement . So you will need to already have it in payment. There is no guarantee they will even accept benefits income anyway. 

huckster

@Meatymonster

Suggest speaking to a social housing company that also offer shared ownership and ask them about how those on benefits can purchase these properties. 

There are large numbers of people claiming UC  who have purchased shared ownership properties, who have obtained mortgages. But I suspect it is quite complicated and therefore you need to speak to those involved in this process.

peteuk

Are you currently living seperate lives, just under one roof (I assume your BTL has tenants) 

It’s going to take time to sell it, so what’s the plan meantime.  Obviously if she is claiming UC for the first time then the £16K capital threshold will be in place (on a second home not lived in) So if 50% capital in the second property is greater than £16K then she wont be able to claim UC.  

Once sold the monies from the sale can be disregarded for 6 months and if still in the process of buying can be disregarded further (she would have to request this) 

Spoonie_Turtle

peteuk said:

Are you currently living seperate lives, just under one roof (I assume your BTL has tenants) 

It’s going to take time to sell it, so what’s the plan meantime.  Obviously if she is claiming UC for the first time then the £16K capital threshold will be in place (on a second home not lived in) So if 50% capital in the second property is greater than £16K then she wont be able to claim UC.  

Once sold the monies from the sale can be disregarded for 6 months and if still in the process of buying can be disregarded further (she would have to request this) 

Ironically it's kind of the other way round.  (Easy to get mixed up, I had to double check.)

A property can be disregarded as capital for UC if the claimant is endeavouring to sell it.

However if it hasn't been occupied as the home*, her share of the money once sold won't fall to be disregarded.  So unless she she can have the money from the sale and put it down as the deposit within the same assessment period, she will be ineligible for UC for a (hopefully) short period.  But as soon as it's been used for the deposit and her savings are £16,000 or below she can reclaim UC.

*The guidance just says "premises formerly occupied as their home", not whether it has to be immediately before being sold or whether there can be a break.  So, I don't know.  But as it's a BTL, so presumably they haven't lived in it as their own home.

Meatymonster

peteuk said:

Are you currently living seperate lives, just under one roof (I assume your BTL has tenants) 

Yes. Ideally would like to do "charge back" where by the home we live in is transfeered to me, but it will have to be sold when the kids turn 18 and she will get a cut. I also don't know if this would affect her UC entitlement until they are 18. It would be like a future inheritance which I presume doesn't affect UC entitlement? 

Meatymonster

marcia_ said:

Meatymonster said:

Hi I'm getting divorced, I will be staying in the main property, we jointly own a buy to let property which we will sell giving my wife 50k deposit that she would like to put towards a shared ownership property. Have worked out based on the property cost she would be entitled to univeral credit and with that and her wages she would easily afford the monthly cost. Greatful for help on a few questions please:

1. Does the mortgage eligibiity take into account the universal credit amount? The calculators I have seen don't have a section for univeral credit 

2. Chicken and egg, how does it work, does she need to be claiming the universal credit first in order to get the mortgage? Also vice versa, does she need to be in the property to claim the UC? We really need them to happen simultaneously ie she buys the place and the UC credit kicks in straight away

3. Does the mortage only come from a specialist bank or any?

4. Is there some kind of specialist advisor she needs to speak to?

Thanks

 No bank will assess possible future benefit entitlement . So you will need to already have it in payment. There is no guarantee they will even accept benefits income anyway. 

Right so she can't put a deposit down without UC being approved as that is needed to get her mortgage approved, and she can't get UC approved with the deposit sitting in her bank account? So chicken and egg

kaMelo

Meatymonster said:

peteuk said:

Are you currently living seperate lives, just under one roof (I assume your BTL has tenants) 

Yes. Ideally would like to do "charge back" where by the home we live in is transfeered to me, but it will have to be sold when the kids turn 18 and she will get a cut. I also don't know if this would affect her UC entitlement until they are 18. It would be like a future inheritance which I presume doesn't affect UC entitlement? 

Something like a mesher order would achieve what you mention but there will be no transfer of property ownership, indeed why would anyone just transfer half their equity away.  As to whether a mesher order would affect eligibility for UC is dependent upon who will be living in the former marital home and where any children are living.

Meatymonster

kaMelo said:

Meatymonster said:

peteuk said:

Are you currently living seperate lives, just under one roof (I assume your BTL has tenants) 

Yes. Ideally would like to do "charge back" where by the home we live in is transfeered to me, but it will have to be sold when the kids turn 18 and she will get a cut. I also don't know if this would affect her UC entitlement until they are 18. It would be like a future inheritance which I presume doesn't affect UC entitlement? 

Something like a mesher order would achieve what you mention but there will be no transfer of property ownership, indeed why would anyone just transfer half their equity away.  As to whether a mesher order would affect eligibility for UC is dependent upon who will be living in the former marital home and where any children are living.

I'll be llving in thr former home, kids would be split between both. She wouldn't be transferring half the equity away like I said she would get her share on sale when kids are 18

kaMelo

Yoyr children can only live in one place, even with shared care. If that is with their mother elsewhere while you live in the former marital home then the value of any equity she has in that home will be counted as capital and exclude her from UC.

The only exception to that would be if you, her former partner, were a lone parent in which case it would be disregarded indefinitely.

Meatymonster

kaMelo said:

Yoyr children can only live in one place, even with shared care. If that is with their mother elsewhere while you live in the former marital home then the value of any equity she has in that home will be counted as capital and exclude her from UC. 

The only exception to that would be if you, her former partner, were a lone parent in which case it would be disregarded indefinitely.

I dont understand this? Surely it's standard practice for kids to stay with both parents when they divorce? it would be 50/50, in which case they would need appropriate accommodation at each place.

Also I just looked into the regs and it seems 5(a) would apply meaning it will NOT be counted as capital? 

SCHEDULE 10

Capital to be disregarded

5.  Premises that a person has ceased to occupy as their home following an estrangement from their former partner where—

(a)the person has ceased to occupy the premises within the past 6 months; or

(b)the person's former partner is a lone parent and occupies the premises as their home.

https://www.legislation.gov.uk/uksi/2013/376/schedule/10