For many, the fear of being unable to afford their monthly mortgage repayments can be a very stressful experience,
especially if they have found themselves in financial difficulties with additional debts and are struggling overall.
Budget and Prioritise
No matter what an individual’s financial circumstances, the priority is to ensure they can keep their homes,
and the first step to ensure this is to assess monthly income and outgoings and ensure that a strict budget is
in place with no unnecessary expenditure. Following this step, it is important to prioritise any debts owed,
with a mortgage usually being at the top of this list.
If an individual has done the above and is still struggling, it is important to seek help from either one of
the many free debt services, such as the National Debtline, or Citizens Advice Bureau (CAB) or from a reputable
financial advisor or licensed Insolvency Practitioner.
If one of the many solutions available is not suitable for an individual, and they are really struggling with
their mortgage, they could be eligible for the Mortgage Rescue Scheme. This is a government run scheme, and
individuals can apply through their local council's housing association which could provide financial help for
individuals to stay in their home.
Not everyone will be eligible for the Mortgage Rescue Scheme, and it is predominantly aimed at those households
where there is someone with a priority need, such as a pregnant woman, someone with dependent children, or
someone who could be deemed vulnerable e.g. those with a disability, or the elderly. In order for the scheme to
be granted, the individual will also need to have a household income of no more than £60,000, the value of the
mortgage and additional debt must not be more than 120% of the value of the property, and there can be no second
property owned. Each council will also have a set limit of the value of the property allowed.
How to apply
An individual can either approach their council directly for information, advice and an application pack, or
they may be referred by the local Citizens Advice Bureau. If the individual has contacted their mortgage lender
for help (which is always advisable) then they themselves may have recommended this course of action.
Once an application has been made, the council will refer the individual to an advisor (if they haven't already
seen one). They will be able to discuss various options that can help with budgeting and may also recommend a
repayment plan or arrangement such as an IVA. The council may at this stage arrange an assessment of the property
and suggest an Equity Loan, which is provided by a Registered Social Landlord (RSL). This will only be offered if
the equity in the property is less than 40%. The loan may be used to pay off some or the entire mortgage to reduce
monthly repayments to an affordable amount. Alternatively, the RSL may offer to buy the property at 90%, allowing
the individual to remain in their home as a tenant. The rent paid is usually considerably lower than the market
rate for the area.