Should you find yourself struggling to pay your mortgage, the best thing you can do is seek help as soon as you can.
Your first port of call should always be your mortgage provider. Many lenders are flexible when it comes to repayments and should try and help you work out a suitable solution or temporary payment plan while you get back on your feet. Alternatively, there are government schemes out there that could help you, which we’ll explore below.
Do you already receive Universal Credit? If you do, you might qualify for help with paying the interest on your mortgage. You should be able to access this if you don’t receive an income from part-time or full-time work, and you don’t get any work related benefits like Statutory Sick Pay or Statutory Maternity Pay.
If you find you do qualify, your mortgage provider should receive the payments directly after a three-month waiting period. The money paid is based on a set rate of interest that’s then applied to the outstanding amount on your mortgage. Bear in mind that the minute you start working again, regardless of how much you earn, the payments will stop.
Support for Mortgage Interest
If you receive benefits but you’ve not yet been moved on to the new system of Universal Credit, you should be able to qualify for similar help in covering the interest payments on your mortgage. This scheme is called “Support for Mortgage Interest” or “SMI”, and might be available to you if you claim income-related Employment and Support Allowance or income-based Jobseeker’s Allowance.
The scheme currently has a 13-week waiting period for people who qualify; however, this is due to be extended to 39 weeks from the 1st April 2016. If you receive Pension Credit, it might be possible for you to skip this waiting period if your mortgage is up to £100,000.
After this waiting period, your mortgage lender will receive cash towards the interest they charge you for your mortgage. The amount they receive will be calculated on your mortgage using a standard interest rate, but should make your monthly mortgage repayments easier to manage as you will be repaying the capital instead. This scheme is available on mortgages up to the value of £200,000.
It’s important to bear in mind that new government proposals set to kick in from April 2018 mean that anyone and everyone claiming SMI from this date will have to repay what the government spends on covering your interest payments on your mortgage – and you will also be charged interest on top of this. The money will have to be repaid either when you’re able to return to work, or when you sell your home.
This scheme is only available in Wales (with a similar scheme in Scotland), as it was unfortunately discontinued for new applicants in England in 2014.
The aim of the scheme in Wales is to stop you from becoming homeless by connecting you with a housing association. To be eligible for the scheme, you’ll need to have spoken to your local authority previously for advice on preventing yourself becoming homeless. Here, your property and finances will be assessed by the housing association, after which your home will either be bought outright by them and rented back to you or they will buy a share in your home (which means you would become a part-owner). By renting this property, you would now be a housing association tenant.
In Scotland, the process works in a similar way under a different name. The Scottish government offers what is called the “Home Owners’ Support Fund”, which includes the “Mortgage to Rent” and the “Mortgage to Shared Equity” schemes. The first of these is similar to the scheme in Wales, whereby a social landlord purchases your property and you rent it off them. The second of these is where the Scottish government buys a stake in your home, while you continue to live there and remain responsible for maintenance and insuring the property.