Homeowners Mortgage Support (HMS)

As the credit crunch hits and the jobs have dried up, you maybe struggling to meet your monthly mortgage payment. The government have introduced a scheme specifically for borrowers that are experiencing a “temporary income shock”. A temporary income shock can be anything that affects your household income, such as, redundancy or reduction in hours, loss of part time or a partner’s earnings, loss of benefit due to a child leaving school, or a grown up child unable to contribute board due to unemployment.

How does it work?

HMS involves changing your mortgage to interest only, and then reducing the payments for a specific period of time (up to two years). This reduction will be based on your financial situation and can be up to 70% of the monthly payment. This is not a payment holiday, and reduced payments do have to be repaid at the end of the scheme, which means that you will likely pay extra interest over the term of your mortgage.

Are you eligible?

• The scheme will only cover borrowers with a total mortgage of less than £400k, and less than 16k in savings.

• You must have been making regular payments (though not necessarily of the full amount due) over the five months before joining the scheme, unless you had agreed a payment holiday with your lender

Where do you go for help?

Speak to your lender: You can check to see if your Lender is participating in the HMS scheme at www.directgov.co.uk. If your lender is participating, they will also need you to meet certain eligibility rules before they make a decision and offer you the scheme.

Not all mortgage lenders are participating in this scheme; however, all lenders must try and offer help to borrowers before commencing any legal action for repossession of the property.  This is called forbearance, or pre action protocol, and may include reducing the mortgage to an interest only product, changing the payment date, or capitalising arrears.

What’s next?

CCCS will provide HMS advice, but please speak to your lender first who will refer you through a dedicated phone line.  If your lender is not participating, CCCS can provide you with general debt advice by contacting our free phone number on 0800 138 1111.

The most important thing to do is speak to your lender.  Even if you are not considering applying for HMS, or any of the other government rescue schemes, you must make contact as soon as you are unable to make a payment to your mortgage.

Do you find that your household costs’ are spiralling and you are struggling to meet your payments, how do you feel about having up to an extra £4250 per year tax free?!

Often people ponder over their budget and look at the areas they can cut back. How about getting rid of those spare boxes and having a good old spring clean and then renting that spare room out?

There is a government tax free scheme, called The Rent a Room Scheme, which allows you to have an income of up to £4250 per year tax free. Anything over this amount would have to be declared.

What could you do with an extra £354 every month? Clear those credit cards, pay off those priority arrears? Or even save for that well earned break.

Some of the Advantages of the scheme include:

ü      Earn an extra income without working extra hours

ü      A house sitter on hand to water those plants and feed the cat when you’re not around

ü      Extra money to clear your debts and get your finances back on track

ü      You would be able to claim expenses for utility bills and house insurance if you go over the allocated £4250 per year.

If all the above sounds like a good idea, then you also need to consider the down side of letting a room. If someone else’s dirty pots and smelly socks is enough to send you round the bend, you may want to set ground rules from the start, this may save a lot of tension further down the line. Things to consider could include smoking, pets and general tidiness.

If you still like the sound of the extra cash and don’t mind sharing your home, you will need to ensure there is an agreed notice period to end the agreement and also make an inventory of all the room contents. You will need to agree what the rent covers as well as date and method of payment.

If you would like further information, please click on this link that will take you to the Direct Gov website.