Sometimes our circumstances in life change for the worse and we may question whether or not we’ll be able to meet all our financial responsibilities, like mortgage repayments. The prospect of home repossession adds to our woes and casts a shadow over all ambitions for the future. Fortunately, homeowners need not panic as mortgage rescue schemes provide help and advice to those who are struggling. We provide some information on these life-saving mortgage rescue schemes.
Sale and rent back schemes
Sale and rent back schemes are operated by private housing companies and marketed to homeowners facing the prospect of repossession. In essence, you sell your home at a reduce price to the housing company, which then rents it back to you for a period of time (usually a fixed term of five years).
Sale and rent back schemes are regulated by the Financial Conduct Authority (FCA), which recommends that homeowners get professional advice before participating in these schemes. This is because you will lose many of the benefits of home ownership, but at least it provides a way for families to keep the same roof over their heads.
You can still apply for housing benefit to assist in paying the rent, although it may be rejected by the housing benefit department if they find you had other options available to you for repaying your mortgage but did not take them.
Shared equity loan
You can take out a loan against whatever equity you have in the property, which can then be used to catch up on your mortgage repayments. These loans are provided by housing associations and are interest free. Remember that you'll need to have some equity in your home in order to qualify.
Unfortunately, government-backed mortgage rescue schemes have been discontinued in England. However, they remain an option in Scotland in the form of the Home Owner's Support Fund, which offers a Mortgage to Rent (MTR) scheme and a Mortgage to Shared Equity (MTSE) scheme.
These are similar to the sale and rent back scheme and shared equity loan respectively, with the difference being that you'll be dealing with the Scottish government rather than a private housing company. The government will in turn cover the legal costs of transferring ownership of the property to a social landlord, in the case of the Mortgage to Rent scheme.
When to Seek out a Mortgage Relief Scheme
If you've fallen on hard times, your first course of action should always be to negotiate with your mortgage lender. Bear in mind that lenders are not rubbing their hands in glee at the prospect of repossessing your home. They'll be just as determined as you to find a compromise.
You should only seek out a mortgage rescue scheme if you have exhausted all other options. As a rule, mortgage rescue schemes require you to meet the following criteria:
• The property for which you are seeking mortgage relief is your only residence
• The property is not subject to any legislation that would prevent it from being sold
• You're unable to sell the property and buy a more affordable home in the same area
While mortgage relief schemes can be a big help, ensure that you are well advised on the requirements and the costs of participating in such schemes.
Disclaimer The information and data provided are for general information purposes. They do not constitute investment advice nor can they take account of your own particular circumstances. If you require any advice on investments, you should contact a financial or other professional advisers.