Can You Use Redundancy Money to Pay Off Mortgage?

Q.

Can you pay off your mortgage with redundancy money and then claim benefits?

A.

Without wishing to sound terribly unhelpful, the answer to this is ‘probably no’.

I say ‘probably’ because it depends on your circumstances, as most benefit-related issues do.

The circumstance in which you may be able to claim benefits after using your redundancy money to pay off your mortgage is mainly related to if you were in mortgage arrears prior to being made redundant. The number of dependants you have also affect the situation.

High Levels of Unemployment

Do be aware that the current economic climate is affecting large number of people, with greater levels of unemployment than has been seen in the UK since the 1970s. This means that much of the advice and official schemes that may have been in place up until now are being ‘rewritten on the hoof’ as more people are making claims, with personal circumstances that do not fit into previously-determined boxes.

What remains true, however, is that there is plenty of advice available. What you must do is ask for it – there is nothing worse than hiding your head in the sand and getting you and your family into a worse financial situation than you need.

Looking for a New Job?

You have not mentioned if you have another job or are actively looking, but it is worth bearing in mind that there are many means-tested benefits available. Alongside job seekers allowance, there is council tax benefit, free school meals, NHS prescription help and many others. If you have been claiming working tax benefit, this will stop within four weeks of stopping work, although you may then be entitled to child tax credits.

There is also a mortgage help benefit called the ‘private or public sector mortgage rescue scheme’ which may help you to understand what you can do with your redundancy money – this is where the being in arrears part comes in.

Start at the CAB

Go along to your local citizens’ advice bureau to ask about what you would be entitled to depending on how much redundancy money you are given and your current financial and family situation. You may also wish to get independent financial advice, which the CAB can help you with, too.