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The Homeowner's Mortgage Support Scheme

By: Louise Smith, barrister - Updated: 18 May 2010 | comments*Discuss
 
Mortgage Support Repossession Homeowners

The Homeowners Mortgage Support Scheme is a government initiative to help people struggling to keep up with their mortgage payments. The Scheme is aimed at homeowners who have experienced a drop in their income but are not entitled to income support. The Scheme is run in conjunction with many UK mortgage lenders.

What is the Homeowners Mortgage Support Scheme?

The Homeowners Mortgage Support Scheme helps homeowners struggling to maintain their mortgage payments by postponing some of the interest payable on their mortgage. The interest which is postponed may be delayed for up to two years. However, it will have to be repaid at a later date and additional interest will be applied to it. Borrowers taking part in the Scheme avoid the threat of repossession for its duration, providing that they comply with the conditions set by their lender.

Who is Eligible for the Homeowners Mortgage Support Scheme?

To be eligible for the Homeowners Mortgage Support Scheme a borrower must have experienced a temporary drop in their income which has made it difficult for them to keep up with their mortgage repayments. The word “temporary” is important – this scheme is not for homeowners whose income is unlikely to return to a level which will allow them to resume their normal mortgage payments. To be eligible, the homeowner’s lender must have agreed to be part of the Scheme.

Amongst those who are not eligible for help from the Homeowners Mortgage Support Scheme are borrowers who own more than one home, who have mortgage payment protection insurance or who are on Jobseeker’s Allowance.

How the Homeowners Mortgage Support Scheme Works

Homeowners who are accepted for the Scheme will be referred, by their lender, to an independent adviser who will be able to offer general advice about debt issues as well as specific advice about the Homeowners Mortgage Support Scheme. The adviser will help the homeowner decide whether the Scheme is right for them.

Borrowers who decide to be part of the Scheme will then have to negotiate with their lender to agree on a monthly mortgage instalment that they can afford. The borrower must commit to meeting this reduced payment every month and it must cover at least 30% of the interest which would ordinarily be payable each month. The lender may also decide to impose additional conditions. If the borrower’s financial circumstances change whilst they are taking part in the Scheme they must tell their lender.

After a year the homeowner will have another meeting with an independent financial advisor who, together with the lender, will review the borrower’s situation and decide whether they are still eligible for the Scheme.

The Homeowner’s Mortgage Support Scheme is, ultimately, at the discretion of the lender. For a borrower to qualify for the scheme their lender must be satisfied that the homeowner will be able to afford both the reduced payments for the duration of the Scheme and the increased mortgage instalments which will be due once the postponed interest becomes payable.

Lenders Not Taking Part in the Homeowners Mortgage Support Scheme

Not all lenders have agreed to be part of the Scheme. Some lenders say that they already help borrowers struggling with their mortgage payments - others are not yet part of the Scheme but plan to join it in the future. However, all mortgage lenders have promised the government that they will try to help homeowners in financial difficulties avoid repossession. Some lenders who are not formally part of the Scheme may still offer similar support for their borrowers.

Borrowers who are not eligible for the Scheme – or whose lenders are not taking part in it – should talk to their lenders about other ways of managing their mortgage payments. Free advice on mortgage and other debt issues is also available from several places including the Citizens Advice Bureau and the Consumer Credit Counselling Service.

It is important to remember that borrowers who take part in this Scheme are likely to be making a commitment to pay higher mortgage payments, once the two-year period ends, to cover the postponed interest. The Homeowners Mortgage Support Scheme may not be the best option for every borrower – even if they are eligible for it.

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