Mortgage advice for householders

Problems paying my mortgage

If you are having problems paying your mortgage and are in arrears, help and assistance is available. Act now to stop the situation becoming worse.

Talk to your lender and don’t ignore any payment problems - mortgages are 'priority debts', which means you should pay them first as otherwise your home could be repossessed. Pay what you can and contact your lender as soon as you start having payment problems. Your lender may :

• agree to change or lengthen the term of your homeowners loan
• accept reduced payments from you in the short term
• add your arrears to the amount you borrowed
• reduce your monthly mortgage payments for a certain period
• spread the repayment of the total amount you owe
• offer you a better loan rate
• allow you time to sell your home.

Many major lenders have also agreed to wait at least three months before taking repossession action and the new Civil Justice Council protocol says repossession should be a last resort. The law also says lenders must treat you fairly and take all your circumstances into account.

You might also want to talk to your Citizen Advice Bureau for further help and information.

Suggestions to help me pay my mortgage

Mortgage Protection Insurance

If you've lost your job or you're too ill to work, check whether you have 'mortgage protection insurance' to cover your payments. The payments may not start straight away - so contact your insurer as soon as possible.

Income Support

If you are on a low income and have a mortgage or loan taken out to buy your home, Income Support may help you with the interest payments after you have been receiving it for 13 weeks (Income Support cannot help with repayments of capital or with the premiums on any endowment or pension policy connected to the mortgage).

There is a limit of £200,000 on the amount of capital that Income Support can help with the interest on. This means that if the outstanding capital on your loan, or loans, is more than £200,000 then only the interest on £200,000 can be met through Income Support.

Where a mortgage is taken out partly for another purpose such as buying a car or providing a business loan, the Income Support scheme will only pay interest on the part of the loan associated with the house purchase or repairs.

Other benefits

Making sure you claim all the benefits you are entitled to such as Working Tax Credit, Child Tax Credit or Council Tax Benefit can help raise your income. To check if you are entitled to other benefits contact the Job Centre.

Temporary income reduction

Homeowners Mortgage Support (PDF) (HMS) is designed to help households whose incomes have dropped as a result of the economic downturn, for example : 

•  If you had two part-time jobs and you lose one of them

• If your hours have been cut or you can no longer work overtime

• If you or your partner loses their job and your household now relies on one income

Your lender will delay some of the monthly interest payments on your mortgage for up to two years. This money is not written off and you will have to pay it back eventually. But, this gives you breathing space to get your finances back on track.

All lenders will work with households who are having difficulty paying their mortgage to help them avoid repossession.

Please note that there are some risks association with HMS as your debt will be increasing and your home may go down in value while you are making lower monthly payments. This might result in negative equity, where your mortgage is more than the value of your home.

My lender is trying to repossess my home what can I do?

If your lender is taking possession proceedings get financial advice immediately from one of the advice agencies listed in the Local Advice Agencies Fact Sheet.  If there is no time for this always attend the attend the court hearing and ask to see the duty Solicitor who will represent you. The worst thing you can do is not attend court as the judge may have no option but to agree to your home being repossessed.

Mortgage rescue scheme

The Mortgage Rescue Scheme is a nationwide initiative which helps to prevent vulnerable families losing their homes and experiencing the trauma of repossession. If you are eligible you could get financial help to stay in your home.

Homeowners of freehold and leasehold properties are eligible for the scheme.

Download: Further information on the Mortgage Rescue Scheme (pdf, 23 KB) (opens new window)

Contact us to make an application for Mortgage Rescue.

Households in financial difficulty, at risk of repossession and threatened with homelessness should seek advice from their lender in the first instance.

Eligibility criteria for the rescue scheme

After you are referred, an assessment of your eligibility will be made in the same way as for homelessness assistance. You must include someone with priority needs:

• A pregnant woman or a person with whom she resides or might reasonably be expected to reside.
• A person with whom dependant children reside or might reasonably be expected to reside.
• A person who is vulnerable as a result of old age, mental illness or a handicap or physical disability or other special reason, or with whom  such a person resides or might reasonably be expected to reside.

The following criteria will also apply:

• All owners of the property must agree to being considered for the mortgage rescue scheme.
• Living in the property must be sustainable after mortgage rescue.
• The household must want to stay in their home and it must not be practical for them to trade down to another property in the area.
• The property must be suitable for the needs of the household (eg it is not severely overcrowded).
• The owners must have sought debt counselling and advice, agreed to debt rescheduling and discussed alternative options with mortgage lenders before admission to the scheme.
• Applicants must not have a second home (including abroad).
• Caps have been set on the value of the property (at regional level) and on the household's income level.

If eligible, the lender is alerted

• Money Advisors draw up and agree with the household a debt management plan or other financial solution setting out their realistic affordable housing costs.
• Registered Social Landlord (RSL) or Home Buy agency are contacted
• The property is visited to ensure it is structurally sound
• Decision is taken on the suitability of a shared equity option or mortgage to rent
• The council needs to agree with Lender to freeze all further action and interest.

Cost to the council

This scheme is one of a range of support schemes we are putting in place to help people through the downturn. MRS is aimed at helping up to 6,000 of the most vulnerable households over two years.

We are targeting support at vulnerable households at risk of repossession to help them sustain home ownership and/or remain in their homes. Our mortgage rescue scheme is designed to support those who cannot pay, not those who won't pay their mortgages. That is why households will need to meet strict eligibility criteria and agree to a debt management plan or other financial solution to qualify.

The involvement of money advisers and the agreement with households of a debt management plan or other financial solution and appropriate restructuring of mortgage payments should ensure repossession does not occur.

The scheme involves a thorough application process to ensure the rescue is affordable and sustainable and that the household will be able to manage any future payments. The process is expected to take an average household around three months to complete.

Many of the households eligible for support will be hardworking families who face difficulties in meeting mortgage payments as a result of current market conditions. This is not a disincentive to work. Separate benefits - such as Support for Mortgage Interest (SMI) assist out of work homeowners in meeting their mortgage payments. 

Am I still eligible for benefits?

The Mortgage Rescue scheme does not affect a household's eligibility for other benefits. There is no double counting, however entitlement to Support for Mortgage Interest (SMI) will be reduced to reflect the size of the new loan.

The Repossessions Prevention Fund

The Repossessions Prevention Fund will be available to anyone threatened with homelessness either through repossession or eviction. For example, it could be used to clear mortgage or second charge arrears in appropriate cases, where this would prevent repossessions.

The maximum loan is £5,000 and is conditional on the household seeking money advice with Citizen's Advice Bureau or other money advice agencies that are used by the council. The principle would be that these loans are not made available unless the home-owner or tenant had acted on money advice and were able to meet any existing or newly negotiated monthly repayments.