Cannot find this covered specifically in the regs......

Original loan is £28,080.00 - borrowed from family and friends, but I cannot see any reason why this cannot be a qualifying loan for the purposes of Para. 15, Sch. 3.

None of the £28,080 has been repaid when client takes out mortgage in 2002 for £98,000 and repays family and friends in full with the cash raised. He can get help with £28,080 of this loan. He then re-mortgages yet again in 2005 for £114,000 and uses £88,339.63 of this sum to redeem the first mortgage.

Are eligible housing costs then reduced proportionately? - i.e 90.14% of original mortgage was outstanding so he is deemed to have £25,311.31 remaining on qualifying loan?

p.s. - just to be clear, IS isn't claimed until end of 2006.

What was the money from the mortgages used for?

Gareth - this is a really crappy case. Client is a one man toxic debt.

Appeal started out as him challenging dept's decision to allow only £13,500 as housing costs for repairs and improvements - on basis that he'd spent a total of £25k including money on carpets, furniture etc and, in any case, the £17.90 mortgage interest that housing costs of £13,500 p/m generated wasn't enough to meet his mortgage payments.

Actual history is this.

Buys flat (RTB) in 1999 for £28k - funds raised from (cash) loans from family and friends.

2002 - mortgages for £98k and pays off family and friends. Remainder of funds spent on bringing family to UK from Bangladesh firstly to visit and then to settle, on home improvements and to live on.

2005 - re-mortgages for £114k - pays off £88k outstanding on first mortgage, repays other family and friends from whom he had borrowed money to live on.

2006 - claims I.S.

2008 - decision to award £13,500 eligible housing costs.

Goes to tribunal - case adjourned and he is warned of possibility that he may lose any entitlement to IS on basis of actual or notional capital. Dept directed to produce a sub to those issues. And at this point seeks legal advice.....

Dept then jump the gun and make no entitlement decision on basis of actual capital - decision is in form of new sub to tribunal and does not deal with notional capital at all. No entitlement decision is from date of claim - and on basis of reg 13(2) D&A regs and client's "refusal" to supply bank statements. Aside from fact that client simply didn't understand what he was required to supply (and has supplied now) they've ballsed up because removal of entitlement from date of claim is clearly a revision and not "a decision under section 8 or 10" - therefore reg 13(2) is not available. No overpayment decision as yet, but no doubt it's in the post.

Biggest problem with case is client's preponderance for doing absolutely everything by cash - including repair and improvement work and inability to produce receipts. I can understand this - he's got sod all English and, quite reasonably, wanted people to carry out the work to whom he could actually communicate what was needed. Try finding a Bengali speaking builder or plumber in the yellow pages - hence cash transactions and no receipts.

Anyway, I'm on top of it - client will need witness statements for various loans and repayment from/to family and friends and for building works as far as these are obtainable.

My question was based on the fact that the Dept only ever awarded housing costs for home improvements - but I see no problem with original loan from family and friends being a qualifying loan under para 15, Sch 3. When this was repaid from the £98k mortgage, the £28k of the mortgage became a qualifying loan. Same would be true of the £114k re-mortgage, but as paying off the original mortgage took up £88k, the amount of qaulifying loan would also have to be reduced proportionately, wouldn't it?

My gut reaction to this one is that the original £28,000 loan used to acquire an interest in the dwelling occupied as the home (which doesn't have to be a secured loan) is eligible and remains so after remortgaging. Ther is then the issue of whether any of the other money borrowed was used for qualifying purposes.

I concur with my learned friend.

Any thoughts on the proportionate reduction question?

Not sure what you mean.

If you have a loan to buy a house, that is a qualifying loan. If you remortgage for a larger amount, only the original amount is an eligible loan unless you can show that you have have used part of the new advance for a different qualifying purpose (approved repairs). You can remortgage as often as you like and the qualifying bit doesn't change - it means that you have only changed who you borrowed it from.

So if it starts as £28,000 it stays £28,000.

OK - let me explain it another way.

You might start out with a qualifying loan of whatever amount, but that can decrease if you pay off part of the capital sum.

Client takes out £98k mortgage - £28k is a qualifying loan. When he re-mortgages for £114k, redeeming the existing mortgage takes £88k - i.e. he had already made capital repayments of £10k on the £98k mortgage. The bank just take the £10k off him, off course, they make no distinction between a qualifying and non-qualifying loan. But for housing costs purposes, is any portion of that £10k deemed to have been repayment of the qualifying loan? Or is he deemed not to have repaid any of the qualifying loan until the non-qualifying part is paid off?