The government has recently promoted three new schemes to help struggling homeowners that have insufficient money in savings accounts to help support their mortgage repayments when faced with a loss of income. The schemes are aimed at homeowners that may be unable to keep up their mortgage payments for one reason or another. It maybe that one partner or the other has lost their job and as a result of the downturn in the economy and they have seen their income plummet.
Before claiming Government help with your mortgage
Before making a claim for any government benefits you should check all your insurance policies first for any income protection or redundancy cover that you have paid contributions towards. It is important that you claim any money that is due to you from any Redundancy cover from your Mortgage Payment Protection Insurance (MPPI) policies first before seeking help from the government.
Mortgage Payment Protection Insurance will generally cover you for your mortgage payments and other associated utility bills. However each insurance provider of MPPI cover will cover you for different amount of your normal income from 50% to 75%. It is also possible to cover yourself only or your partner as well should either of you have an accident, sickness or if you are made redundant. You can also cover yourselves for a period of 12 months to 24 months depending on your personal preferences, circumstances and finances.
There are three different government schemes available which are dependent on your level of vulnerability. Some people may be struggling due to the main bread winner having lost their job or a partner having lost his or her job and are now unemployed and relying on one income to meet all their monthly bills or you may be facing an imminent home repossession by your mortgage lender. The three types of help available are Mortgage Rescue Scheme, Support Mortgage Interest and Homeowner Mortgage Support.
Mortgage Rescue Scheme
This scheme is run by your local housing authority and you need to meet certain criteria to be eligible for example someone in your household must have priority needs like a pregnant woman, someone with dependent children or someone who is vulnerable due to old age or has a physical or mental impairment.
You will need to then meet the following criteria:
- You earn less than £60,000
- Your home needs to be under a certain value
- Everyone named on the mortgage must agree to be considered
- You should have received debt help from a debt counsellor at the Citizens Advice Bureau or from Shelter and have made arrangements to repay your debts
- You need to have a clear need to stay in your home
- You must not own a second home anywhere
You may be considered eligible for help if your home is in ‘negative equity’ and your all your loans and outstanding mortgage are not more than 120% of the value of your home.
The scheme works where they involve a Registered Social Landlord or an independent housing organisation to either purchase a proportion of your mortgage in return for a reduced monthly rent or they may decide to pay off the mortgage completely by buying your homer and renting it back. The rent will be at a level lower than the ‘market rate’ thus making it cheaper than renting from a private landlord.
All application for this scheme should be made through your local council. This scheme is only available in England although there are similar schemes available in Wales, Scotland and Northern Ireland. For details search your local council website for more information about this scheme in your area. Todate there has only been one case of anyone having achieved a mortgage rescue.
Homeowner Mortgage Support (HMS)
This scheme will help homeowners who have had a temporary or an unexpected drop in income and are now finding it hard to meet their mortgage repayments and are likely to get their finances back on track in the near future. To qualify for this scheme you will need to switch your monthly mortgage payment from a repayment mortgage to an interest only basis.
You will need to commit to paying as much as you can afford towards your monthly mortgage payments and your mortgage lender will add the difference of your monthly mortgage payment to your mortgage balance for a period of two years. This will increase your mortgage balance and you will have to pay this money back with interest over the remaining term of your mortgage. Note: not all lenders have yet signed up to this arrangement yet.
You will not qualify for Homeowner Mortgage Support if you own more than one home; your income is unlikely to return to its previous level; you have an insurance policy that protects your mortgage; your mortgage provider thinks you will not be able to maintain your reduced monthly mortgage payments or you are claiming Jobseekers Allowance – in this case it may be possible to claim support for mortgage interest (SMI). Talk to your mortgage provider to see if you are eligible and to find out what other options may be available.
Support Mortgage Interest (SMI)
In order to qualify for Support Mortgage Interest you need to be a homeowner and you should be claiming Income Support, income-based Jobseeker’s Allowance or an income-related Employment and Support Allowance. You may then benefit from applying for additional support for your mortgage interest. This support does not cover car loan payments, credit card debt payments, insurance premiums or any mortgage arrears. It does cover the payments towards your mortgage interest only payments for loans taken out to purchase your home or possibly a specific home improvement loan.
A temporary package of measures was introduced by the Chancellor of the Exchequer on the 5 January 2009 to provide additional help to homeowners due to the downturn in our economy. These new changes will be reviewed when the housing market recovers from its crisis.
In order to claim under the temporary new rules you will need to meet the following criteria:
- There is now a 13 week waiting period before help is provided and then100% of the eligible mortgage interest will be paid.
- The capital limit for which support mortgage interest will be paid is £200,000
- There is a two year time limit on payment of mortgage interest but this is only for new Jobseeker’s Allowance claims.
If you feel that you are eligible to claim Support Mortgage Interest and you require further advice then you should contact your local authority or Jobcentre Plus office.
Think carefully before entering into any of the above schemes and take professional mortgage and financial advice from expert. You should also contact a debt advisor for help in finding a debt solution to any debt problems you may have at the current time due to a drop in income or a loss of income due to redundancy.
Your thoughts, experiences and comments are welcome. You can join the discussion below and leave your thoughts and experiences.