Selling buy to let to pay debts and claiming Universal credit

Grumpy_chap

Bookworm225 said:

yes, I am perfectly capable of reading without needing to direct emoji at other people , but not seeing an answer to this...

Grumpy_chap said:

 Something seems inconsistent, though, with the figures the OP has quoted.
- Purchased 2nd home for £160k with mortgage.
 - Typically, max 75% LTV so that would mean £120k mortgage and £40k deposit (equity).
 - OP says house value now £200k.  If none of the original mortgage capital value has been paid down (interest only mortgage), that would mean now £120k mortgage plus £80k equity.
 - OP says after selling at £200k, they will clear the mortgage and only be left with £5k...

Thanks - obviously, I failed to make reference to the CGT liability that will, presumably, arise for selling the £160k BTL property at £200k.
Either way, even after CGT and the direct costs of sale, I would have ordinarily expected the clear amount remaining to be greater than the £5k suggested.
Perhaps the OP can clarify.

TanKhan

Grumpy_chap said:

Bookworm225 said:

yes, I am perfectly capable of reading without needing to direct emoji at other people , but not seeing an answer to this...

Grumpy_chap said:

 Something seems inconsistent, though, with the figures the OP has quoted.
- Purchased 2nd home for £160k with mortgage.
 - Typically, max 75% LTV so that would mean £120k mortgage and £40k deposit (equity).
 - OP says house value now £200k.  If none of the original mortgage capital value has been paid down (interest only mortgage), that would mean now £120k mortgage plus £80k equity.
 - OP says after selling at £200k, they will clear the mortgage and only be left with £5k...

Thanks - obviously, I failed to make reference to the CGT liability that will, presumably, arise for selling the £160k BTL property at £200k.
Either way, even after CGT and the direct costs of sale, I would have ordinarily expected the clear amount remaining to be greater than the £5k suggested.
Perhaps the OP can clarify.

My figures mentioned were just approximate and have private debts too that need paying to friends and family. I only posted my original question to get a rough idea of how UC works and if the situation I was in was unusual or not. 

All the advice has helped. Thanks everyone

Grumpy_chap

While the repayment of debt is never DoC, the application for UC may require some evidence / bank statements.

If requested, those bank statements will show that you have received a large finance inflow and also the large finance outflows to settle the outstanding mortgage, pay the CGT etc.  (It may be that the mortgage and CGT is repaid direct by the Solicitor so never lands in your account.) 

Then there will be evidence of the repayment of any debts such as credit card or personal loans. 

Then there will be the repayment of the "private debts".  The DM (Decision Maker) may challenge these "private debts" with more scrutiny as the perception could be that the money is simply being looked after by your friends and family.  Is there documented evidence that the "private debts" are truly so?

I am not commenting to question your statements but merely advising how the DM may question the transactions.

ReadySteadyPop

TanKhan said:

peterhjohnson said:

TanKhan said:

Rent is already at its highest. No one will pay more. 

That's surprising. In many areas of the country, there is a desperate shortage of rented accommodation. Have you checked with a few letting agents?

We set the rent quite high at the beginning and there wasn't much interest so reduced it slightly and found one excellent tenant who has paid each month for past 8 months without fail and never once asked or complained about anything. Even with £100 or £200 my financial situation will not get better as I'm unable to work for 20+ hours I used to do before due to the care I give. Carers allowance is around £83 a week and I was making around £500 a week before. Selling property is a way out and lots of stress relief. 

How will viewings work with the tenant there, can you rely on them to leave when you want them to?

TanKhan

ReadySteadyPop said:

TanKhan said:

peterhjohnson said:

TanKhan said:

Rent is already at its highest. No one will pay more. 

That's surprising. In many areas of the country, there is a desperate shortage of rented accommodation. Have you checked with a few letting agents?

We set the rent quite high at the beginning and there wasn't much interest so reduced it slightly and found one excellent tenant who has paid each month for past 8 months without fail and never once asked or complained about anything. Even with £100 or £200 my financial situation will not get better as I'm unable to work for 20+ hours I used to do before due to the care I give. Carers allowance is around £83 a week and I was making around £500 a week before. Selling property is a way out and lots of stress relief. 

How will viewings work with the tenant there, can you rely on them to leave when you want them to?

Tenant is already looking to move. They are on a month to month rolling contract already. Excellent tenant so far never missed a single payment and has had Excellent communication with me so far regarding any little issues we have had. Also they are happy for me to let the agent bring round potential buyers. I inspected the house also recently at the request of the tenant and it was immaculate. Tenant and his wife work such long hours and shifts they are hardly at home.

TanKhan

Grumpy_chap said:

While the repayment of debt is never DoC, the application for UC may require some evidence / bank statements.

If requested, those bank statements will show that you have received a large finance inflow and also the large finance outflows to settle the outstanding mortgage, pay the CGT etc.  (It may be that the mortgage and CGT is repaid direct by the Solicitor so never lands in your account.) 

Then there will be evidence of the repayment of any debts such as credit card or personal loans. 

Then there will be the repayment of the "private debts".  The DM (Decision Maker) may challenge these "private debts" with more scrutiny as the perception could be that the money is simply being looked after by your friends and family.  Is there documented evidence that the "private debts" are truly so?

I am not commenting to question your statements but merely advising how the DM may question the transactions.

Appreciate the advice. I knew some of this but wanted 2nd opinion just for reassurance and preparation for what might happen

ReadySteadyPop

TanKhan said:

ReadySteadyPop said:

TanKhan said:

peterhjohnson said:

TanKhan said:

Rent is already at its highest. No one will pay more. 

That's surprising. In many areas of the country, there is a desperate shortage of rented accommodation. Have you checked with a few letting agents?

We set the rent quite high at the beginning and there wasn't much interest so reduced it slightly and found one excellent tenant who has paid each month for past 8 months without fail and never once asked or complained about anything. Even with £100 or £200 my financial situation will not get better as I'm unable to work for 20+ hours I used to do before due to the care I give. Carers allowance is around £83 a week and I was making around £500 a week before. Selling property is a way out and lots of stress relief. 

How will viewings work with the tenant there, can you rely on them to leave when you want them to?

Tenant is already looking to move. They are on a month to month rolling contract already. Excellent tenant so far never missed a single payment and has had Excellent communication with me so far regarding any little issues we have had. Also they are happy for me to let the agent bring round potential buyers. I inspected the house also recently at the request of the tenant and it was immaculate. Tenant and his wife work such long hours and shifts they are hardly at home.

Great, sounds so unlike some of the tenant/landlord stories you often hear!