Mortgage Rescue Scheme in the UK
If you live in England, are struggling to make your mortgage payments, and are at risk of losing your home, you might qualify for mortgage aid with the Mortgage Rescue Scheme.
The Mortgage Rescue Scheme is a government sponsored program that aims to help the most vulnerable members of society, and their family members. It provides direct financial help for eligible home owners so they can stay in their home. This program is managed at the council level.. If you do not live in England there are also similar schemes in the rest of the United Kingdom; use the same link to contact your local council, and ask what program is available to you.
The program focuses on “high-level priority” cases like pregnant women, parents, the sick and the elderly. If you or someone in your immediate family falls into this category you could qualify for financial help.
The eligibility criterion of this program is designed to help low to medium income families that don’t have the resources to help themselves. It is also biased against home owners of expensive homes or whose homes have dramatically dropped in value.
To qualify you must:
1) Not own a second home, this includes holiday homes and investments whether in the UK or abroad.
2) The market value of your home must be below than a level set by region. Ask your council what that level is in your area.
3) Your mortgage balance cannot be more than 120% of your home’s market value. For instance, if your mortgage balance is £200,000 and your house is only worth £150,000 you will not qualify. However if it had a current market value of £160,000 you would qualify.
4) Your household total income must be less than £60,000 a year. This includes all working members of your family.
If you qualify for the Mortgage Rescue Scheme (MRS) you will have to meet with financial advisers of your local council. They will give you advice on how you can restructure your finances and manage debt as efficiently as possible. This will include an inspection and appraisal of your home. The MRS will then approach a Registered Social Landlord (RSL) to provide specific and practical help. There are two main avenues a RSL can use to provide financial help: A Shared Equity Loan and a Government Mortgage to Rent Program.
A Shared Equity Loan is an interest only loan that is used to reduce your monthly payments to a manageable level. However, to qualify you must have a 25% equity on your mortgage balance. This means the market value of your home must be 25% higher than the amount you owe on it.
Government Mortgage to Rent programs is a drastic measure for homeowners who cannot afford their mortgage but want to stay in their home. In this scheme the RSL actually buys your home for 97% of its market value and rents it back to you for a reduced rate.
Mortgage Rescue Scheme and Your Home: The Facts
You cannot pay your mortgage; letters from your lender threatening to repossess your home litter your kitchen table. This is the nightmare of all homeowners; especially homeowners with a family to look after. Unfortunately the housing and credit crisis has pushed too many families to this situation. There are no quick fixes if you are at risk of losing your home. But there are government programs you can join to protect your house, and avoid foreclosure.
One of these programs is the Mortgage Rescue Scheme. This scheme was created in January 2009; it helps vulnerable groups like families with dependent children, the elderly and other groups that will be entitled to homelessness aid if their home is repossessed.
What should you do if you are at risk of losing your home?
Talk to your lender. Explain your situation, and ask for help. Help could mean a loan modification that reduced monthly payments by reducing interest rates, extending the loan’s term, or reducing the mortgage’s balance. Some lenders will also provide a forbearance period where you do not have to pay your mortgage to allow you to reorganize your finances.
What can the Mortgage Rescue Scheme do for you?
The mortgage rescue scheme has two options: the Government Mortgage to Rent program, and the Shared Equity program. The Government Mortgage to Rent is for vulnerable families who cannot afford their mortgages. The government assigns a Registered Social Landlord (RSL) to buy the property from the homeowner and rent it back to them for an amount they can afford. Any money left after paying for the mortgage and other loans attached to the house can be used to pay other household debts. Under this program the homeowners no longer owns the property, but can continue to live in it.
Shared equity is a less drastic program. It is for homeowners that can continue to pay their mortgage if their payments are lowered to match their income. The government assigns a Registered Social Landlord to grant the homeowners a loan that is used to reduce mortgage payments.
What is the timeframe for the Mortgage Rescue Scheme?
It all depends on each case, but if the RSL and the lender come to an agreement it all can be closed in four to twelve weeks.
Will this affect other benefits?
No. The Mortgage Rescue Scheme does not affect a households eligibility for other benefits. The only exception is in the case of Shared Equity loans where entitlement for Support for Mortgage Interest (SMI) is reduced to reflect the new loan.
As you can see this scheme is not for everyone. In all likelihood you will lose ownership or control over your home; although you and your family can continue to live in it. This is not a program for borrowers who won’t pay their loans, but for those who want to keep their homes but can’t.
UK mortgage rescue plan: What Are Your Options?
The property market has been through a major slump since the end of 2008. This has affected other parts of the economy causing family incomes to drop. Thousands of families now face repossession of their homes in the United Kingdom. Many schemes have been created to deal with this problem. Three are of special interest: the Homeowner Mortgage Support Scheme, the Mortgage Rescue Scheme and the Court Protocol.
If you are struggling to pay your mortgage it is important you understand what your options are when searching for help. Some programs require you to sell your home in order to continue living in it.
Homeowner Mortgage Support Scheme
The Homeowner Mortgage Support Scheme started in April 2009, and covers the entire UK. This program is designed to reduce your mortgage interest payments by up to 70% if your income has suddenly dropped for reasons out of your control. For example, if you are made redundant, or your employer reduces your working hours you can apply for Homeowner Mortgage Support. To qualify your mortgage balance must be less than £400,000, and you must have less than £16,000 in your savings accounts. Unfortunately only a few banks are offering this scheme; those that received government assistance at the height of the credit crisis. Contact your lender and find out if this program is available to you.
Mortgage Rescue Scheme
The Mortgage Rescue Scheme is being applied throughout the UK, in England, Wales, Scotland and North Ireland. In England the scheme is set to cost £280 million over two years. The government claims 6,000 families will benefit from this program, although current figures only show a fraction of this number have completed the program. The scheme is designed to help the most vulnerable groups at risk of losing their homes, and that will be entitled to homelessness assistance. The scheme started in England in January 2009 and was extended in April 2009 to help those in negative equity. Negative equity occurs when your mortgage balance is greater than the market value of your home. Applicants can have a negative equity of up to 120%. This means that if your home is worth £100,000 the Mortgage Rescue Scheme can offer up to £120,000 to pay your mortgage balance.
This scheme uses not for profit lenders that buy the mortgages of struggling borrowers and allow them to stay in their homes for an affordable rent. The catch in this scheme is that only certain borrowers are eligible: families with children, the elderly, and other vulnerable groups that will receive homelessness assistance anyway if their home is repossessed. The other catch is that you lose ownership over your home.
Court Protocol
Court Protocol is not so much a mortgage assistance program, but a procedure lenders must follow before repossessing a borrowers home. This procedure includes informing borrowers of how much they owe and what they must do to avoid repossession, considering requests for loan modifications and responding to these requests within ten working days.