Government's mortgage rescue scheme

Are you struggling to pay your mortgage?
Is your home at risk of repossession?

Help may have arrived for you with the introduction of the Government's Mortgage Rescue Scheme.

The Mortgage Rescue Scheme is now available to Bury residents. It is specifically aimed at families who have been threatened with repossession, and have had all the help their lender is willing to offer. There are two possible solutions the scheme can provide depending upon your circumstances:

Shared equity:

Plumlife, the Homebuy Agent will provide you with a low interest loan to pay off some of your mortgage debt and reduce your monthly payments. The loan will be secured on your home but you will still own the property.

Mortgage to rent:

This is where a housing association buys your property and you become their tenant and pay them rent. 

Customer questions and answers

In September 2008, the Government announced a £200m Mortgage Rescue Scheme, designed to prevent vulnerable families losing their homes through repossession. This scheme is specifically aimed at families who are at risk of repossession and are no longer able to pay their mortgage payments.

Mortgage Rescue is not the only way to prevent repossession. Your mortgage lender, debt advisors and the Council will be able to help you explore all of the options which may be available to you. If you receive a letter or phone call from your lender, never ignore it. If you don't understand the letter, don't be afraid to ask your lender what it means. Mortgage lenders should only take possession action as a last resort.

If you took out your mortgage after October 2004, there are rules that lenders must follow. These rules explain how lenders are expected to help borrowers who are having money problems. Your local Citizens Advice Bureau (CAB) will be able to help you understand the rules. If you think your lender is ignoring these rules, you can complain to the Financial Ombudsman Service

If you are worried about meeting your mortgage payments talk to your lender. If you are still worried talk to the CAB or Council, who will be able to help you make a Mortgage Rescue application.

What is Mortgage Rescue?

Mortgage Rescue offers an early intervention option for local authorities to assist households before they face eviction. It is a voluntary scheme - the Council has no statutory duty to offer Mortgage Rescue, nor is it designed or intended to replace the Councils existing statutory homelessness duties or powers. Mortgage Rescue is intended to help households to whom the Council would otherwise owe a duty under the homelessness legislation if they became homeless as a result of repossession. It was launched in January 2009 and although it is voluntary, it is up and running in Bury. The Mortgage Rescue Scheme is a last resort, and can only be used if all other lender options have been exhausted.

Mortgage Rescue is a way of preventing home owners losing their homes. It is being paid for in part by the Government and in part by Plumlife (the administrators of the Mortgage Rescue Scheme) or the housing association who has agreed to purchase your home. There are two different solutions for Mortgage Rescue, these are known as 'Shared Equity' and 'Mortgage to Rent'. Both are explained in more detail below. You will only be recommended for the option that is most appropriate for you.

Who is eligible?

Only people who are eligible for homeless assistance will qualify, provided that all other options have been exhausted with the mortgage lender. You may be eligible for this scheme if you are at risk of repossession and:

• you or someone living with you has dependent children (i.e 15 or younger or a person aged 16 to 18 who is a full time student) who live with you.
• you or someone you live with is pregnant, elderly, ill or disabled.

You will not be eligible if you own any other property or your household income is more than £60,000 a year. In addition, you may not be eligible if the total amount you owe on your mortgage and any other secured loans is more than 120 per cent of the value of your home.  Furthermore, there are limits on the value of your property that may stop you applying for this help.

Households in financial difficulty, at risk of repossession and threatened with homelessness should seek advice from their lender in the first instance. Further advice and support will be available from the Council, CAB and other advice agencies.

Referrals can be made by advice agencies, courts or lenders. Households can also self-refer.

What actually happens to eligible applicants?

The process is as follows:

On referral to the local authority, the household's homelessness eligibility is assessed. Once this has been done an officer from the Council will help you to complete the Mortgage Rescue Application Form.

• If you are eligible, the Council will contact your lender and ask them to suspend all further possession proceedings whilst your application is being assessed.
• You will be referred to CAB who will complete a financial statement on your behalf. They will also be able to draw up a debt management plan for you.
• An officer from the Council will visit your home to make sure that it is suitable for continued occupation.
• The application will then be sent to Plumlife (the administrators of the Mortgage Rescue Scheme) and your home will be professionally valued. Following the valuation Plumlife will make a decision on the suitability of the shared equity option or mortgage to rent.
• If you are considered to be suitable for the 'Shared Equity' option Plumlife will provide you with a low interest loan to pay off some of your mortgage debt to reduce your monthly payments.
• If you are being considered for the 'Mortgage to Rent' option Plumlife will offer your property to a number of housing associations operating in the area.  If there is no interest in your property and none of the housing associations want to buy it, your Mortgage Rescue Application will be cancelled.

Options

Option 1 Shared Equity

You will be provided with an equity loan to reduce your monthly mortgage payments. You will repay the equity loan at a low interest rate and the loan will be secured on your home but you will still own the property.

How does it work?

Plumlife will provide you with a loan of between 25% and 75% percent of your current mortgage. Plumlife will tell you the exact amount they are proposing to lend you. You will continue to have to make monthly payments on your remaining mortgage and on the loan to Plumlife. The total of these will be less than your current monthly payments. If you do not make payments on time you could be at risk of losing your home.

Your outstanding mortgage will be reduced in line with the equity loan. Your mortgage provider will be able to let you know how much your monthly payments will be. As well as mortgage payments, you will have to pay an interest fee of 1.75% of the equity loan amount each year. You will have to pay this in monthly instalments; Plumlife will tell you exactly how much this will be.

You can pay off the equity loan at any time, either in full or in stages. The minimum repayment that can be made at any time is 10% of the value of your home. Because the loan from Plumlife is an equity loan the amount you are required to pay back will increase if the value of your home increases. If the value of your home decreases you will still have to pay back the initial amount lent to you by Plumlife.

What happens next?

Plumlife will make an appointment for your home to be professionally valued. Following the valuation they will make you an offer of an equity loan. This will be the amount of money they are willing to lend you to reduce your mortgage payments. You will need to consider this carefully and may want to take independent advice.

If you accept the offer, it could take up to three months before you receive the loan. Whilst you are waiting for the equity loan to be paid, you must continue to make payments to your mortgage provider. Once Plumlife has given you the equity loan you will have to make the necessary payments to your mortgage provider and Plumlife on a monthly basis, or you may be at risk of losing your home.

If you decide not to accept the offer you will need to speak to the Homeless Prevention Team at Bury Council.

What happens if I want to sell my home?

When you sell your home you will have to repay Plumlife the full amount outstanding on the loan. The amount payable is based upon the value of your home at the time you sell it.

Do I have to pay for mortgage rescue?

Other than interest fee payments you do not have to make any cash payment to be rescued. To take part in Mortgage Rescue, you will have to make a contribution from the equity you have in your home. Equity is the amount of value remaining once the outstanding level of your mortgage is taken away from the value of your home. You will have to make an equity contribution of 3% of the value of the loan that Plumlife lends you. For example if Plumlife lends you £60,000 you will have to contribute £1,800 in equity.

Option 2 Mortgage to Rent

A housing association will buy your property and rent it back to you.

How does it work?

A housing association will buy your home from you at 90% of the full market value and rent it back to you.  The rent that you pay will be 20% cheaper than private rent in the locality but may be more expensive than some mortgages. You may be able to access Housing Benefit from the Council to help you with the rent.

You will be given an Assured Shorthold Tenancy. The housing association buying your property will show you a copy of this agreement when they make an offer for your home. This agreement will set out all the terms and conditions of your tenancy. The tenancy will be for an initial fixed period of three years but provided that you pay your rent on time and keep to other conditions of the agreement, you may be able to live there for much longer. If you do not pay your rent on time or otherwise break the conditions of the agreement the housing association can evict you from your home.

Do I have to pay for it?

Other than payment of rent you do not have to make any cash payments to be rescued. However, a housing association will only buy your home for 90% of the full market value so you will have already contributed 10% of the value of your home.  For example if the value of your home is £100,000  a housing association will buy it for £90,000.

The money that the housing association pays for your home must first be used to pay off your existing mortgage and any other debts secured on your home. If there is any money left, this will be paid to you. You should get advice from an independent advice agency about how you could use any remaining money to repay other debts and how this may affect any benefits you may be able to claim.

What happens next?

Plumlife (the administrators of the Mortgage Rescue Scheme) will arrange an appointment for your home to be professionally valued.  Following the valuation Plumlife will offer your property to a number of housing associations operating in the area.

If a buyer is found and you accept the offer the sale of your home could take months to complete, as the process is similar to a private sale. Whilst you wait for the sale to take place you must continue to make payments to your lenders. If you decide not to accept the offer you will need to contact the Homeless Team at Bury Council to discuss your options. 

If there is no interest in your property and none of the housing associations want to buy it, your Mortgage Rescue Application will be cancelled and you will need to contact the Homeless Team at Bury Council to discuss your options.

What if I want to buy my home back?

If at any time you wish to buy your home back you should talk to the housing association. It is likely that they will only sell it at its true value at that time; this could be considerably higher than the price they paid for it. You will have no legal 'right' to buy or discount.

Are people still eligible for other benefits?

The Mortgage Rescue Scheme does not affect a household's eligibility for other benefits.

Additional information can be found on the Direct.gov website.

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