19 August 2009

Home Owners in Financial Difficulties: Help is Available

In Scotland there are now four sources of assistance available to home owners in financial difficulties and in danger of having their homes repossessed. Here, we talk you through the schemes available and provide an overview of the eligibility criteria.

Support for Mortgage Interest

What support is available?
Eligible claimants will receive a contribution towards their mortgage interest payments and certain other housing costs. Repayment mortgages are not eligible for support so in order to receive assistance you may need to speak to your lender about changing to an interest-only mortgage.

You can only claim support for mortgage interest on loans of up to £200,000. If your loan is bigger than this, you will have to pay the interest on the amount over £200,000 yourself. The scheme is conditional and time limited in some cases, for instance assistance for those claiming income-based Jobseekers Allowance is only available for 104 weeks (2 years). There is also a 13 week waiting period, from point of application, before support will be paid out (except for those over 60 and receiving Pension Credit who will receive support immediately).

Who should apply?
Support for Mortgage Interest can only be paid as an element of Income Support and some contribution-based benefits including income based Jobseeker's Allowance, income related Employment and Support Allowance and Pension Credit. Anyone entitled to receive these benefits should discuss their eligibility for Support for Mortgage Interest with an adviser.

Home Owners Mortgage Support (HMS)

What support is available?
HMS involves the home owner switching to an interest-only mortgage, the interest payments can then be reduced for up to two years. The interest which remains unpaid will be added to the outstanding capital owed so in the long term this arrangement will increase your debt, but in the short term, may also help you to keep your home. The Direct Gov website has information about which lenders are currently participating in the scheme.

Who should apply?
HMS is a scheme to help home owners who are experiencing temporary financial problems, i.e. because they have lost their job. Because it is only a short term solution the home owner must expect their financial circumstances to improve or return to normal before the end of the arrangement.

You cannot apply to HMS if you are eligible for Support for Mortgage Interest. However you may be eligible for HMS and also be eligible for Mortgage to Rent and Mortgage to Shared Equity so before applying it is important to think carefully and speak to a Money Adviser about which scheme would be most suitable for you.

Home Owners' Support Fund: Mortgage to Rent and Mortgage to Shared Equity

What support is available?
The Mortgage to Rent scheme involves you entering into an arrangement with a social landlord, such as a housing association or local authority, who will buy your home but allow you to continue to live there as a tenant. You will no longer own your own home but you will not have to move out and you will be given a Scottish Secure Tenancy agreement. You will be charged the same rent as your landlord charges other tenants for similar types of property in similar locations. You should discuss this with your landlord before agreeing to sell your home. Conditions apply. Further information can be found in the Scottish Government's leaflet 'The Home Owners Support Fund'.

The Mortgage to Shared Equity scheme involves the Scottish Government taking a financial stake in your home. Unlike the Mortgage to Rent Scheme you will still own your home but you will be able to reduce the amount you have to pay to your lender every month. As with the Mortgage to Rent scheme conditions apply. Further information can be found in the Scottish Government's leaflet 'The Home Owners Support Fund'.

Who should apply?
To be considered for either the Mortgage to Rent or Mortgage to Shared Equity scheme you must have:

* failed to reach agreement with your lender(s) on how to manage your arrears, and

* obtained independent advice about your financial situation from a money adviser.

In addition:

* You must have been unable to make full payments on a loan secured against your home for at least three months and have cumulative arrears of at least one month. If you have had a trustee appointed to your estate this condition regarding arrears does not apply.

* You must be ineligible for help through Support for Mortgage Interest.

* You must not normally own a home elsewhere.

* You must have lived in your home for at least 12 months.

* You must not hold capital in excess of £2,000 if you are under 60 years of age or £4,000 if you are 60 years or older. We explain what we mean by 'capital' later on.

To be considered for the Mortgage to Rent scheme you must also:

* Hold less than 25 per cent equity in your home except where:

* Have had a trustee appointed to your estate; or have a mortgage that is not conducted on a capital and interest repayment basis.

To be considered for the Mortgage to Shared Equity scheme you must also:

* Hold 25 per cent or more equity in your home.

* Have a capital and interest repayment mortgage and not have had a trustee appointed to your estate.

For further information about seeing a Money Adviser, or to discuss any of the information contained in this article, please contact the Edinburgh Housing Advice Partnership on 0845 302 4607.


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