Any guidance on Mortgage options?


T

Ted Hutchinson

Does anyone know where I can find guidance on how Flexible Mortgages
and or offset mortgages are dealt with regarding Income Support
claims?

If someone reduced his capital by early repayment would he be able to
take a repayment holiday while DWP continued to pay the interest or
might the early repayment be regarded as intentional deprivation of
capital. Similarly if it was an offset mortgage would the ability to
regain capital mean that one was regarded as having notional capital?

What I need is a source of guidance on the potential pitfalls of the
various mortgage options available relating to possible future means
tested benefit claims.
 
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A

Andy Pandy

Ted Hutchinson said:
Does anyone know where I can find guidance on how Flexible Mortgages
and or offset mortgages are dealt with regarding Income Support
claims?

If someone reduced his capital by early repayment would he be able to
take a repayment holiday while DWP continued to pay the interest or
might the early repayment be regarded as intentional deprivation of
capital. Similarly if it was an offset mortgage would the ability to
regain capital mean that one was regarded as having notional capital?

What I need is a source of guidance on the potential pitfalls of the
various mortgage options available relating to possible future means
tested benefit claims.
I've asked this before and tried researching it myself, but it seems there are
no specific rules on flexible mortgages. A mortgage is simply a debt, and
repaying part of it seems to be no different to repaying any other debt such as
a credit card.

Theoretically repaying debt could be regarded as intentional deprivation of
capital, so someone could run into problems if they used their redundancy to pay
down their mortgage (or credit card) and then tried to claim means tested
benefits. But if, while in work, they pay down their mortgage with any spare
cash they have then this can hardly be viewed as intentional deprivation of
capital any more than spending the money on a holiday or a new car etc.

AIUI, ISMI is based on a government set percentage of the outstanding mortgage
rather than the actual interest being paid, so if the borrower took a payment
holiday while unemployed then the fact that he is not actually paying any
interest shouldn't stop him getting ISMI! The payment holiday would have the
effect of increasing the mortgage debt, so I wonder if he'd be able to apply for
a greater amount of ISMI as his debt increases??

OTOH, I believe a loan can be regarded as income for the purposes of means
tested benefits, so would a payment holiday or a drawdown on a flexible loan be
regarded as "income" which could reduce means tested benefits? Taken to its
logical conclusion this would result in any credit card purchases being regarded
as "income", since every time you pay by credit card you are effectively taking
out a loan (even if it's just till your next statement date).

Offset mortgages are different in that there are separate accounts of savings,
mortgage, current account, other loans etc which are linked. So when you are
asked how much you have in savings on means tested benefit forms, I think you
would have to declare your savings account even if it is linked to a mortgage
with a higher debt than your savings. But I could be wrong, the taxman doesn't
seem to mind the savings interest being used to reduce the mortgage interest
thereby avoiding tax...
 
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T

Ted Hutchinson

Thanks
If anyone comes up with a source of official information on various
alternative mortgage options and impact on Mortgage interest payments,
notional income, notional capital rules I'd be pleased for the link.
Ted
 

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