Housing laws vary between England and Scotland so it is important to get reliable information that applies to your area.

Scotland has has a scheme similar to England’s Mortgage Rescue Scheme in place since 2003. This program offers Scottish homeowners facing foreclosure or repossession the option of selling their home to a housing association and stay in their home as tenants. The value of the house is used to pay off the homeowner’s mortgage and any late payments still pending.

However, on the 25th of June 2008, the Scottish Parliament created a new homeowners support fund designed to help Scottish homeowners who are struggling to pay their mortgages. The new program introduced a modified mortgage to rent scheme and a new mortgage to equity scheme, as well as grants to fund advice agencies, so free housing counseling is available to homeowners. These measures became effective the 16th of March 2009. How do these programs work? What requirements must you meet to qualify for these programs? And more importantly, are these programs a good idea for me?

Scotland’s mortgage rescue schemes are designed to help struggling homeowners stay in their homes. They can be effective and help you through difficult times by allowing to remain in your home, however some schemes can simply increase your debts. It is important to note that these programs are not for homeowners who are going through a temporary financial setback. If you are confident your financial situation will improve soon you should look into alternative programs, such as negotiating reduced payments with your bank.

How do they work?

There are two main versions of Mortgage rescue schemes in Scotland: Sale and Rent Back Schemes and Shared Ownership Schemes.

Sale and Rent Back schemes do what the label says: they buy your house at just below market value, pay off your mortgage and then rent your house back to you at a lower than the market value rate. This option is good if your situation is so serious you cannot and will not afford your mortgage payments in the foreseeable future. Consider your options carefully as this option is final, and if you opt for it, you will lose ownership of your home. Once you are a tenant you can be evicted if you do not pay your rent or follow landlord/tenant regulations.

Shared ownership schemes are a less drastic option. If you decide to join the scheme you will sell a portion of your home in exchange for a loan to pay off or reduce your monthly mortgage payments to an affordable level. You can then buy your home back when your financial situation improves.

There are other points to consider before you decide to join one of these programs, such as who runs the scheme, what tenant rights will you have and what the risks are. Our next article will answer these and other questions about Scotland’s mortgage rescue schemes.

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