Universal Credit with a mortgage: what it pays and what it does not

Universal Credit can include an amount for housing, and for a renter it is the largest element after the standard allowance. It covers rent to a private landlord, and rent plus eligible service charges if you rent from a housing association or a council. What it does not cover, at all, is a mortgage. There is no element for mortgage interest, nothing for capital repayments, nothing towards buildings insurance and nothing towards arrears. Owning your home does not stop you claiming: the standard allowance, the child element, the childcare element, the health element and the carer element are all available to you exactly as they are to a renter. It is only the housing side that changes, and the gap is filled, if it is filled at all, by a separate scheme.

Support for Mortgage Interest is the help that exists for mortgage interest, and the word people miss is loan. It is not a benefit and it is not written off. You repay what you have received, with interest, when you sell your home or transfer ownership of it, unless you move the loan across to another property. You can make voluntary repayments sooner if you want to. It covers interest only, so it does nothing about the capital part of a repayment mortgage, and it cannot be used for missed payments or for any insurance policy attached to the mortgage. Payments normally go straight to your lender rather than to you. There is no credit check, and no guarantee that a mortgage or loan you take out will be covered.

You cannot get Support for Mortgage Interest on the day your Universal Credit starts. The rule is that you must have been getting Universal Credit for three months in a row first, though if you moved to Universal Credit within a month of another qualifying benefit ending, the three months can be made up of time on both. You can apply from the date your benefit starts, so make the application early and let the qualifying period run underneath it. If your Universal Credit stops and you claim again within six months, the help resumes straight away rather than restarting the clock. Three months is a long time to cover a mortgage from nothing, which is why the first call should be your lender: payment holidays, interest-only periods and term extensions all exist, and a lender can act faster than DWP.

The capital rules are where homeowners expect bad news and mostly do not get it. The value of the property you own and live in is not taken into account at all. Below £6,000.00 in money, savings and investments, capital is ignored entirely. Between £6,000.00 and £16,000.00, every £250.00 or part of it above the lower limit is treated as £4.35 a month of income you do not actually receive, and at £16,000.00 or above there is no entitlement whatever your income. Property you own but do not live in normally counts, with narrow exceptions where it is the main home of a close relative who is retired or severely unwell, or of a former partner who is a lone parent. Money from selling your home is disregarded for six months only where you intend to use it to buy another home to live in, and that period can be extended where it is reasonable. Sell up and move into rented accommodation with no plan to buy again and there is no disregard at all, so proceeds above the upper limit end entitlement straight away.

One part of the housing element does reach owner-occupiers, but it is fenced by two hard conditions that catch most people out. Universal Credit can help with eligible service charges, which matters most in a leasehold flat where the charge can rival a small rent. It is barred outright in any assessment period in which you or your partner have any earned income at all, whatever the work is and however little it pays. And it does not start until you have had nine consecutive assessment periods on Universal Credit with no earned income: take any work during those nine months and the clock stops and restarts from scratch. Declare the charges anyway, because the qualifying period only runs while you would otherwise qualify. Two other things to check. Council Tax Reduction is run by your council and needs a separate application. And the benefit cap applies to a homeowner household exactly as it does to a renter. A non-dependant adult does not reduce an owner-occupier service charge award, because the housing cost contribution applies to renters only.