We are currently getting a lot of questions from people about changes to the Government’s help with mortgages at our drop-in service, so I thought I would try and clarify it for people.
Q. I have heard a lot about changes in the way the Government are helping people with mortgages through their benefits, but I don’t really understand what is happening.
I am getting Jobseekers Allowance and I have an extra payment which goes to my mortgage lender from the DWP, I do not want to change to the new system if it will cost me more money.
A. The current system that you are on now includes an extra payment which goes directly to the mortgage lender as long as you have served the waiting period of 39 weeks (previously 13 weeks).
The amount is paid as an extra benefit based on the amount of capital outstanding on your mortgage and is paid to cover the estimated interest on your mortgage, not the capital itself.
Through Jobseekers Allowance the length of time you can receive help towards your mortgage is limited to two years, although other benefits such as Income Support, Employment and Support Allowance, Universal Credit and Pension Credit are not time limited.
The new system will take effect from 5/4/18 and will see a loan system being introduced.
There will still be a 39 week waiting period before the mortgage payments can be made, unless you are transferring from the old system.
Under the new system you will be entitled to help towards your mortgage, but it will be paid as a loan which must be repaid to the DWP either when you sell your house or when it is transferred to someone else (unless it passes to your spouse on your death, in which case it would be repaid when they sell the property or when they die).
If, when you come to sell the house there is not enough equity to repay the loan, then the rest of the DWP debt will be written off, so you will not have an outstanding debt to the DWP.
You can choose to make voluntary repayments without selling your home if you are financially able to; these payments must be at least £100.
If you are receiving help towards your mortgage now, then you should receive a letter from the DWP offering you the option of signing up to the new loan system, the letter confirms that you should seek financial advice before agreeing to the loan.
You do not have to sign up to the new system, but the current system will end on April 5 and you will no longer receive payments to your mortgage lender.
Before signing up to the loan system you could speak to your mortgage lender about any alternatives they can offer; they may, for example, be able to give you a payment break if you are expecting to get back to work shortly.