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Schemes to provide support to homeowners in danger of losing their homes
This information applies to Scotland only
Homeowners Mortgage Support - UK scheme for deferring interest payments
If you are struggling to pay your mortgage you might be eligible for a UK government scheme called Homeowners Mortgage Support. Homeowners Mortgage Support (HMS) is a United Kingdom scheme designed to help borrowers who have suffered a temporary loss of household income, for example, redundancy within a two income household, but which is not expected to be a permanent loss of income.
The scheme allows you to defer a proportion of mortgage interest payments for up to two years. The deferred payments are rolled up, added to the principal sum, and paid at a later date when the borrower’s financial circumstances have improved.
This scheme is aimed at people who have a temporary loss of income who would be helped now by the suspension of your monthly payments and you would not lose your home. You would still have to pay the money back at a later date.
This scheme is closed to new applicants from 21 April 2011. If you are already part of the scheme you will not be affected.
Who can apply for Homeowners Mortgage Support
You can apply to join HMS before 21 April 2011 as long as your lender takes part in the scheme and you meet a number of conditions. These include:-
- having savings of less than £16,000
- having no more than £400,000 outstanding on your mortgage and any other loans secured against your home
- you will need to get independent debt advice, for example, from a Citizens Advice Bureau
- being able to pay at least 30% of the monthly interest due on your mortgage
- making regular payments in agreement with your lender for at least five months before joining the scheme. These don’t have to be full payments if agreed with your lender. It is possible for your lender to agree to this afterwards.
Your lender will decide whether or not you are suitable to join the scheme.
Things you need to think about before you apply for Homeowners Mortgage Support
If you think you might be interested in the scheme, you need to think about the following things before you apply:-
- you will still be paying a monthly mortgage and you could still lose your home if you don’t keep up with payments while you’re on the scheme
- when you come off the scheme, your monthly payments are likely to be higher than when you started because you will be paying back some of the money that you put off paying.
You can get more information about HMS from the Directgov website at: www.direct.gov.uk.
Mortgage rescue schemes
A mortgage rescue scheme is intended to rescue you from losing your home when you have mortgage arrears that you can’t pay off. It allows you to continue to live in your own home as a tenant or part-owner/part-tenant. These schemes may also be known as buy back, sale and rent back or a sale and lease back scheme.
They are not suitable if your financial worries are temporary. When you know that your financial circumstances are going to improve you should negotiate with your lender about your arrears and ongoing mortgage payments.
On this page, we tell you about:-
- what to look out for before signing up to a mortgage rescue scheme
- schemes run by social landlords, such as a local authority or housing association
- government-backed Mortgage Rescue schemes.
If you're having serious difficulties paying your mortgage, for example, if you've started getting letters from your mortgage lender threatening court action, you should get help from an experienced debt adviser straight away.
You can get debt advice from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.
Who provides mortgage rescue schemes
A scheme could be run by:-
- a not-for-profit agency such as a social landlord, a local authority or housing association
- The Scottish Government – the Home Owners' Support Fund.
Issues to look out for before signing up for a mortgage rescue scheme
If you are thinking about signing up to a mortgage rescue scheme you need to understand exactly what you are signing up to and how this will affect your housing and financial situation in the long term. You should find out:-
- is benefit and debt advice provided and is it independent - you should always get independent financial advice - you should get advice from an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB
- who pays for the costs of selling the home - the ‘conveyancing’ costs - this may be hidden as an ‘administration’ fee
- if you are selling the whole property you must check what type of tenancy you are being offered - you are maybe being offered a tenancy with limited protection from eviction at the end of the tenancy.
For more information about your rights as a private tenant, see Renting from a private landlord - how is the rent being set and what is in the agreement about rent increases
- what are your responsibilities and obligations as a tenant
- what are the responsibilities and obligations of the landlord
- can you buy back the property if your circumstances change
- is there any insurance cover in case the mortgage rescue scheme develops financial difficulties.
As an owner-occupier, you may be able to get help with your mortgage interest through Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance (ESA) or Pension Credit. However you must remember that if you sell your home but continue to live there and pay rent you may not be eligible for housing benefit to help with your rent.
For more information about Housing Benefit, see Help with your rent - Housing Benefit.
Mortgage rescue schemes run by social landlords
Some local authorities and housing associations may run mortgage rescue schemes independently but most have chosen to work with the Scottish Government in providing mortgage support to home owners as part of the Home Owners' Support Fund and its two schemes.
To find out if there are any mortgage rescue schemes run by local authorities and housing associations, ask your local authority.
If you are thinking about signing up to a mortgage rescue scheme run by a social landlord, you should get advice from an experienced adviser, for example, at a citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
You may also want to think about getting independent financial advice. This will help to make sure you've thought carefully about how signing up to a mortgage rescue scheme will affect your financial and housing situation in the longer term.
Scottish Government Home Owners' Support Fund: Mortgage to Rent and Mortgage to Shared Equity schemes
The Mortgage to Rent and the Mortgage to Shared Equity schemes are the two schemes that make up the Home Owners' Support Fund run by the Scottish Government.
If you are eligible for the UK Homewners Mortgage Support you will not usually also be eligible for the Scottish Government schemes. In some exceptional circumstances you might be able to apply to the Scottish schemes if you are still in danger of losing your home after help from the UK scheme.
More about the UK scheme called Homeowners Mortgage Support.
What are the schemes
The Mortgage to Rent (MTR) scheme enables you to stay in your home by selling it to a social landlord. You become a tenant of that landlord. Once the property is sold to the social landlord, the secured debts/loans on your property are paid off and you pay rent to the social landlord. The costs of legally transferring ownership to the social landlord is paid by the scheme not by you. If there is money left over you may be able to keep it.
The Mortgage to Shared Equity (MTSE) scheme allows you to carry on being the owner but reduces what you owe for your property because The Scottish Government buys a stake in your property. This means that you can reduce your mortgage. You don’t have to make any payments to the Scottish Government but you do carry on paying a mortgage to your lender for a smaller amount. You retain full responsibility for looking after and insuring the property .You will have to pay the costs of changing the legal documents about ownership of the property and you will have to use a solicitor to do this. When your circumstances improve you can buy back the proportion of your property that the Scottish Government owns.
Who can apply
To be able to apply for these schemes:-
- you have to have independent advice about your financial situation before applying for either scheme
- the value of your property must be no more than the local maximum property price. In some cases, the maximum price may be disregarded if the client has particular housing needs as a result of a disability
- you must not have been able to make full payments on your mortgage for at least three months and have arrears of at least one month. A letter from your lender confirming this must be included with the application form
- you must not normally be eligible for help through other UK Government support schemes. A letter confirming this must be included with the application form. In exceptional cases you might be allowed to apply.
- you must not normally own a property elsewhere. In exceptional circumstances, this condition may be waived
- you or another joint owner intends to remain in the property and at least one of the owners must have lived in the property for at least 12 months
- you must not have capital of more than £2,000 if you are under 60 years old, or more than £4,000 if you are 60 years old or older.
As well as these conditions above there are strict rules in each scheme about the proportion of the property for which you currently have a mortgage. For example, in the Mortgage to Rent scheme you have to have a mortgage for 75% of the property or more. The reason for this is that the scheme is intended for people who cannot just sell their home, make a profit and then buy a cheaper one.
If you're interested in either scheme, you can read more of the detail of each scheme in a leaflet available on the Scottish Government website at www.scotland.gov.uk.
Contact for MTR and MTSE schemes
The MTR and MTSE schemes are administered by the Scottish Government. The contact details are as follows:-
Home Owners' Support Fund Team
The Scottish Government
Housing and Regeneration
Highlander House
58 Waterloo Street
Glasgow
G2 7DA
Tel: 0845 279 9999
E-mail: homeownerssupportfund@scotland.gsi.gov.uk
What happens if you don’t get on to either scheme
If you are unsuccessful in applying to the Mortgage to Rent or Mortgage to Shared Equity schemes you may be in serious danger of losing your home. You must seek help from an experienced adviser as you may be able to suspend any legal action your lender is taking to repossess your home To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.
Further help
On Adviceguide
For more information about increasing your income, see Increasing your income.
For more information about cutting down your expenses, see How to spend less.
On the Money Advice Service website
The Money Advice Service website has lots of useful information about managing your money, mortgages, insurance and other financial products.
For more information about different types of mortgage, go to: www.moneyadviceservice.org.uk.
For more information about the different mortgage deals currently available, including comparison tables, go to: www.moneyadviceservice.org.uk.
To work out how much you can afford to pay on a mortgage, including a mortgage calculator, go to: www.moneyadviceservice.org.uk.
For more hints and tips about managing your money, go to: www.moneyadviceservice.org.uk.
For information about accident, sickness and unemployment insurance, go to: www.moneyadviceservice.org.uk.
Independent financial advice
For help in finding an independent financial adviser, contact one of the following organisations:
Independent Financial Promotions (IFAP)
Website: www.unbiased.co.uk
Institute of Financial Planning (IFP)
Tel: 0117 945 2470
E-mail: enquiries@financialplanning.org.uk
Website: www.financialplanning.org.uk
Personal Finance Society (PFS)
E-mail: customer.serv@thepfs.org
Website: www.findanadviser.org
