There is governmental help to deal with imminent repossession or an inability to pay off mortgages that some people can fall back on, specifically those who are already receiving benefits off the government.
The help on offer from the state is liable to change though, so a cemented MPPI would be better due to its reliability, and it will likely pay out more than the government schemes can.
Mortgage Payment Protection Plan
Support for Mortgage Interest (SMI)
SMI is aimed at helping people who already have income related benefits off the government, and can help pay off the interest of a mortgage or loans taken out to pay for repairs to your home.
However, SMI is usually paid to the lender directly so you would not actually see any of the money personally.
Also, it specifically only pays the interest gathered while the household income is suffering. It does not pay off any of the capital borrowed. It effectively puts the mortgage on pause while the beneficiary finds their feet again.
What Support for Mortgage Interest offers
SMI can help pay up to £200,000 interest of a home repair loan or mortgage if any of the following are applicable:
- You receive Income Support
- You receive Income-based Job Seeker’s allowance (the SMI will pay for 2 years only)
- You receive Employment and support allowance
SMI can help pay off up to £100,000 interest of a home repair loan or a mortgage if:
- You receive Pension Credit
What Support for Mortgage Interest does not Cover
- The amount you borrowed
- Any payments toward insurance policies you may have
- Mortgage arrears
Claiming Support for Mortgage Interest
You need to contact your Jobcentre Plus or the Pension Service, whichever is applicable to you.
Mortgage Interest Run On
Beneficiaries who manage to find work again can still continue to claim SMI for a period of four weeks after their income benefits stop due to an increase in income. This is called Mortgage Interest Run On.
In order to receive the Run On, you must:
- Have been claiming the benefit for at least 26 consecutive weeks
- Still have to pay the same payouts as you did when you were on the benefits
- Expect the income boost to last 5 weeks or more
Mortgage Rescue Scheme
This is a last resort attempt to keep mortgage holders of priority need in their homes when they are in imminent danger of being rendered homeless. Upon registering with your local council, they will arrange for you to meet a financial advisor and to get an assessment of the property.
You can also get either of two forms of financial help. Both involve a Registered Social Landlord (RSL) which is an independent housing association or organisation.
Mortgage Rescue Equity Loan
An equity loan is given by the RSL. They help to reduce the mortgage payments to a manageable sum with an interest only loan.
Mortgage Rescue to Rent
In this version, the RSL pays off your mortgage and so then owns a share of your home. You then pay rent to them. Through this method though, you will most likely no longer be the home owner. The rent is at roughly 20% less than the average rate for your area as this is likely to be cheaper than the mortgage payments you were paying before.
Eligibility for Mortgage Rescue Schemes
The household needs to have a priority need. This means the household needs either
- someone with dependent children
- someone who is pregnant
- someone who suffers from a physical or mental disability
- someone who is vulnerable due to old age
There are also some additional criteria, including:
- the household has an annual income of under £60,000
- the homeowners do not own a second home
- the mortgage value is between 75% and 120% of the property value
You should contact your local council to find out whether you are eligible for sure.
In London, this scheme is no longer available as of October 2013, which was cut short from the rest of the scheme which closes to applicants in March 2014.
You must also contact your local council in order to claim.