Universal Credit and Offset Mortgages

[Allycat]

Hi there
I am unable to be furloughed as a started my new job in March.
I need to claim Universal credit. Does anyone know the rules regarding Offset mortgages when claiming? As although I owe a large amount in mortgage, I have some inheritance of over £16k offsetting it in an offset mortgage account.
Do I still have to declare this as savings??
Many thanks in advance and stay safe everyone

You wont be able to claim Uc at all if you have savings over 16k. Are the savings accessible - I think that will be a factor in determining whether they will be counted. Perhaps speak to CAB ?

Actually I think even if the savings/ capital are inaccessible like ISA's or second properties they would rule you out of claiming Uc so I definitely think these would. I think it may be a case of applying, declaring the savings ( you have to do this on the application anyway) and then putting a note of explanation on your journal that it is an offset mortgage. A decision maker will then be involved and you will be notified whether you are entitled.

Also speak to your mortgage lender to discuss the 3 month mortgage payment break.

Thanks for your replies. I can use the savings to pay some of the mortgage off without any penalties, as the accounts are attached. I think that's probably what I need to do. That way I will have lower savings and will be able to claim. Just such a shame as I wanted to use the money for a much needed new kitchen 😔

You will need to make sure that doesn't breach deprivation of capital rules.

Do you know you can go back to your previous employer and ask them to put you back on their books and furlough you from there with no cost to them? Totally legal and acceptable if that's a possibility...

Omg it's so unfair. So someone with zero mortgage with a £1m house can claim if they have less than £16k savings, but people trying to manage their money cant. I realise im in a better position than a lot of people, but only because my mum worked hard to own her own home 😔 let hope that this all blows over soon.

Thanks for the comment about the that I may be able to claim from my previous employer, but as you can imagine whenever you leave a job there's a few sour grapes. Not sure they will help but if it comes to it I will ask. Thanks to you all and the best of health and luck in these uncertain times 😊

Savings didn't used to count for the first 6 months if you'd paid enough NI. Is that not still the case?

Omg it's so unfair. So someone with zero mortgage with a £1m house can claim if they have less than £16k savings,

UC is not based in how much your house is worth. I think you are very fortunate to have £16k and people should absolutely be using their own money first. It's not unfair.

I think in this case, you need to pay down the offset to avoid losing universal credit. It's not savings, it's money that should have been paid off your mortgage, but due to the way the product is structured, is currently sitting in a different pot.

Anyone who can't see that is an idiot. If you'd had a normal mortgage, you would have owed, say £150k, but had no savings, but instead you owe £200k but have £50k in savings, so the net position is the same and you should be entitled to UC in the same way.

But the OP said she was intending to use the £16,000 for a kitchen refurb, not to pay off some of her mortgage.

Most people, I imagine, have offset mortgages to take advantage of the lower interest costs whilst still having the money available for an emergency. The £16,000 should be in an account that can be accessed. Yes it's rubbish having to use savings to pay bills due to job loss, but there will be a few people in the same boat. As a previous poster mentioned, UC people might see her using a chunk of this money to pay off her mortgage as deprivation of capital.

@BarbaraofSeville

We are idiots for suggesting OP uses money she put by for a kitchen to live on rather before claiming universal credit?

It's hard times but the idea people should claim benefits before using their own money is batshit. So yes, sorry you can't have a new kitchen OP but at least you don't need to visit the food bank.

To all, thank you for your replies. It was always going to be a bit of a debate, but I appreciate every comment all the same. Wishing you all the best of health 🙂

UC is not based in how much your house is worth. I think you are very fortunate to have £16k and people should absolutely be using their own money first. It's not unfair

In a way it is. Offset is just a different way of repaying a mortgage. It’s useful as you don’t pay remortgage fees if you need money for home improvements etc, or if you’re self employed or get paid in a way that benefits- for example self employed- your tax bill can be reducing mortgage interest while it’s in your bank, until you need to pay it.

I’ve had my offset mortgage for 20 years and it’s worked well. But now i find myself needing UC and i’m not eligible because my repayments are sat in an ISA. If I cash my isa in now and repay I will lose c. £10k because the markets have tanked- all advice is to hold out for market recovery.

If i’d have chosen a repayment mortgage instead i’d have exactly the same amount of money, it would just be equity in the house rather than an isa...

Just such a shame as I wanted to use the money for a much needed new kitchen

Are you serious? You are planning to claim benefits when you actually have plenty of savings sitting there. But despite getting free money and keeping the savings by ploughing them into an asset - you are complaining because you wanted to buy a new kitchen!?

(not aimed at the OP), what happens to those people on UC who get their rent paid?!

ifthe OP has saved for a kitchen, then buy the kitchen, or pay off some mortgage

Make it disappear OP, claim benefits, you arnt frauding the system,. Winds me up those who get full rents paid (in some part of the country), they are better off than all of us!

Everyone has a choice. Either save or repay their mortgage. So has everyone repaid their mortgage rather than saving £2k for a holiday, or £5k for a car? We're actually all in the same boat for goodness sake you could have a smaller mortgage than me but have less savings. That's the point I'm trying to make (and how it could stand). I posted this in money matter and not in aibu for a reason. Please dont be judgey

Making the money ‘disappear’ would fall foul of the deprivation of capital rules.

Can’t you buy a kitchen before you apply and say it was for essential home improvements

Everyone has a choice. Either save or repay their mortgage. So has everyone repaid their mortgage rather than saving £2k for a holiday, or £5k for a car? We're actually all in the same boat for goodness sake you could have a smaller mortgage than me but have less savings

This is all irrelevant. What other people chose means nothing. You chose to save. Now that means for you right now in this time of absolute crisis you are fortunate enough to have some savings. Never mind your bloody kitchen

But the OP also has a bigger mortgage due to the offset. It's not the same as having extra 'spare money'.

Imagine that some time ago three families moved into the same street and all bought houses for the same price and with a mortgage of £200k and all needed some work. All had the same income and outgoings, situation all the same.

Family 1 cracked on with it, paying for their new kitchen and the other work on the house as they went along, together with paying off their mortgage in the standard repayment manner. They've now finished all the work, have a lovely modern home, not much in savings, say £1k, and owe £150k on their mortgage. They've also spent any spare money on 'living for today' so have had new cars, holidays, eaten out a lot etc.

Family 2 have also done all the work to their house, and decided that they will use any spare money they have to overpay their mortgage, so they only owe £50k on their mortgage. They have a bit of savings too, but less than £6k.

Meanwhile, the OP decided to take out an offset mortgage and build up some spare capacity in the offset pot before doing the work on her house. She's nearly there when coronavirus strikes and she loses her income. The OP is the main earner in the family, so this is a big hit.

Her mortgage balance is still £200k, but she has £100k in her offset pot. She is therefore the only one out of the three families effectively expected to risk the security of her home, solely due to the type of mortgage she has.

If the OP had spent all her money on doing the house up, buying and doing things or overpaying her mortgage, she would be entitled to universal credit as would families 1 and 2 above. But because of the way her mortgage is arranged, she isn't and rightly feels aggrieved at the unfairness of the situation.

It's not about family 1v2v3 though. It's about OP having money to live on. It's quite simple. What was intended (the kitchen) really cannot be because OP should be using her money to live, not splashing out £16k and then claiming UC.

Could you not claim "new style JSA"?

www.gov.uk/jobseekers-allowance/eligibility

Thanks for the brilliant example Barbaraofseville. Thanks to everyone else as well. I think I'll contact the CAB and ask how the figures should be presented as I may be worrying over nothing.

Universal Credit is an emergency pot as a safety net for people who otherwise can’t afford to live. That is why the universal rules are that if you have over 16K of savings you don’t qualify.

The savings the OP has are spare as they were meant for a new kitchen.

Moving that money into the mortgage and then claiming Universal Credit is dodgy at best. If that is allowed, what is to stop anyone with a house from paying off a large chunk of mortgage with savings then claiming benefits?

They, like the OP, then have the money in their asset which they can choose to re-mortgage or release later and taxpayer money on top.

I very much doubt this would be allowed OP but citizens advice will tell you.

Still amazed that your take on hoping to qualify for benefits during a national economic crisis is that you are gutted the money you are planning to hide on your assets can’t then be spent on a new kitchen - then tell others not to judge you for it!