Help with Mortgage Payments

by Mark Johnston

As the recession continues to bite, some struggling home owners have been given a helping hand by the government.

There were two initatives that the government initially promoted to support home owners that were struggling their mortgage payments.

The first initative was the homeowners mortgage support scheme (Hms) which was launched in 2009. This scheme was to help those struggling to meet their mortgage payments due to a temporary drop in income but who still have some regular income, it allowed those fitting the specific criteria by defering paying part of the mortgage interest for up to 2 years.

The borrower still had to pay at least 30% of the interest and the other interest that is not paid (60%) is added on to the outstanding mortgage balance. Therefore it will still have to be repaid at some point.

This particular scheme however was closed to any new applicant from the 21 April 2011.

The second initative is the support for mortgage interest (sml) was launched to help those home owners who have lost their jobs. This can be claimed after 13 weeks after losing their jobs and for up to the first £200,000 of their mortgage.

Mortgages above this level will still qualify, but the home owners would have to top up the interest for the amount above £200,000.

To qualifyfor this scheme a home owner needs to be claiming one of the following:

Jobseekers allowence income based.

Income support.

Pension credit.

Income related Employment and support allowance.

Support for mortgage interest (SMI) can not help home owners pay the amount borrowered, or mortgage arrears.

The chancellor, George Osborne said in last years budget that this particular scheme will operate until at least January 2013

The standard interest rate used to calculate smi is currently 3.36%

Lord Freud, the minister for welfare reform has called for evidence into how this scheme will operate in the future.

Support for mortgage interest (SMI) is not meant to be a long term solution and is intended to help those who have had an unfortunate change in circumstancesin the short term.

The Building Society Assosiation (BSA) is currently calling for the amount received is support for mortgage interest (SMI) payments to reflect the actual rate the borrower is paying, rather than a set standard rate.

Lord Freud said “the current system of support for mortgage interest (SMI) payments does not encourage people to get on top of their own finances. It is also not sustainable”. He also added “we are committed to supporting homeowners to stay in their own homes, but is the future this type of support must be fair and affordable”.

These changes could see a charge put on properties of anyone who receives the assistance, which would be recovered when the house was sold.

The suggestion was welcomed by the Council Mortgage Lenders (CML) and the Building Society Assosiation (BSA). However two other proposals raised worries. The first is a plan to make the payment to the home owners themselves, rather than straight from the government to the lender. The

second is that the qualifying period may return to 39 weeks instead of 13 weeks.

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