Certus Mortgage Solutions: Assistance with Mortgage Repayments

This page is intended to help if you are having difficulty in meeting your mortgage repayments. If you are in this situation there are three important points to note-

* Your lender will be sympathetic and will provide as much assistance as possible.

* Your state befits might be available which could increase your income and/or help with your mortgage repayments.

* In some cases, various agencies may be able to offer you advice and assistance.

What should you NOT do

You should never take out a loan at a higher rate of interest to pay your regular mortgage repayments; this can only worsen the problem. It also not advisable for you to abandon your property or send the keys to your lender without first obtaining the agreement of your lender. You should be aware that-

* You will remain fully liable for the debt/mortgage, including the interest building up on the loan, the property is sold.

* You will remain full liable for the costs of selling the property and any shortfall between sale price of the property and the outstanding debt.

* Your lender may pursue you, through the courts, to recover the total amount owing.

* You may be recorded on a register of people who have had their properties repossessed and find it more difficult to obtain a loan in the finances in the future.

Telling your lender

If you are unable to maker your full mortgage repayments, of if you anticipate that this may be the case in the ear future, you should tell your lender immediately. You should not worry that your lender will be unhelpful. The sooner you contact your lender the better, so action can be taken to deal with difficulty. Some lenders have telephone help lines or debt counselling facilities to assist making contact.

However, if you are worried about approaching your lender direct, or if you have multiple debts, you should consult your local citizens' advice bureau or local authority housing advice centre. Further sources of advice are given at the end of the leaflet.

Income support

Income Support (IS) is a Social Security benefit to help people on low income. Categories of people who might be able to claim IS include those aged 60 or over, people bringing up children on their own, those who are too ill o disabled to work, or people who give up work to become carers. You cannot claim IS if you work 16 hours or more per week or your partner works 24 hours or more, or if you have savings of over £8,000.

If you qualify for IS, then there are some limited arrangements in place to help meet your mortgage interest, provided that the purpose of the loan was for the purpose of your home or from work to be carried out to maintain the property’s fitness for occupation. There is an upper limited of £100,000 on the size of your mortgage which IS will cover, although if your mortgage is larger than this, you may still be entitled to receive assistance on the first £100,00. Restrictions can be imposed if your housing costs are considered to be excessive. In addition to mortgage interest, IS may also cover ground rent on certain charges, but it will not cover the capital part of your mortgage payments or the premiums on an endowment policy. IS for mortgage interest is normally paid direct to your mortgage lender and credited to your mortgage account every four weeks.

New rules came into effect on 2 October 1995 concerning help with mortgages for those on IS or Job seekers Allowance and they depend on when you took the out your mortgage –

* If you took out your current mortgage before 2 October 1995 then, no help is given with housing costs for the first eight weeks followed by 50% of eligible for the next eighteen weeks and 100% eligible interest thereafter. The Benefit Agency will pay interest at a standard rate which may be higher, or lower, than the rate you are actually paying.

* If you took out your current mortgage on or after 2 October 1995 then you will receive no assistance with your mortgage interest for the first 39 weeks of a claim; after that period the full of your eligible mortgage interest ( again subject to the £100,000 loan limit) will be paid(at the standard rate). However, if you re-mortgage with the same lender after 2 October you will be treated as if your mortgage was already in existence before this date (see paragraph).

Special arrangements apply if you already claim IS; check with your local Benefits Agency office there are also some exceptions to the rules for certain groups of people. In particular,

* There are no initial exclusion period for pensioners aged 60 or over, who will be able to receive IS for the full amount of their eligible mortgage interest at the standard rate of interest as soon a s they make a claim;

* If you took out your mortgage after 2 October 1995 you will treated as if you were already a burrower at that date ( that is, you will have only an eight week exclusion period rather than 39 week period) if you :-

* are a carer who is not required to sign on as unemployed;

* have a pre-existing medical condition or HIV which meant that you could not obtain or could not make a claim under mortgage payment protection;

* are a prisoner on remand awaiting trial or sentence;

* Have been widowed or deserted by your partner and have dependant children.

The amount IS paid depends on how much the current rules say you need to live on, and on your income and resources. It is worked out by adding up personal allowances and premiums for which you qualify, together with allowances for housing costs, and then taking away your income. Income from a mortgage payment protection insurance policy will be taken into account in assessing eligibility for IS. However, the Benefits Agency will disregard this if you have been widowed or deserted by your partner and have dependent children.

* the premium on the mortgage insurance policy itself;

* any amount which is used to meet interest payments that cannot be met due to the restriction period at the outset claim;

* any amount which is used to meet interest payments that cannot be net due to the £100,000 limit excessive cost restrictions;

* any amount which is used in capital repayments (or endowment policy premiums);

* Any amount which is used to meet buildings insurance premiums.

Claims for IS should be made form A1 (or form SP1 if you are a pensioner) which can be obtained by telephone, by letter or in person at your local Benefits Agency office. In addition home- owner will need to obtain an MI12 from the Benefits Agency, part of which has to be completed by the lender.

Leaflet IS8, obtainable from Benefits Agency offices and Job Centres, explains the Income Support rules for home-owners in detail. Payments from the Social Fund may also be available, for further details see leaflet SB16

Job Seekers Allowance

Job Seekers Allowance (JSA) replaces Income Support and Unemployment Benefit for those signing on as unemployed. Help can be given with housing costs for those getting Income Bases JSA. The rules concerning housing costs are exactly the same as for those claiming IS. Claims for JSA should be made on forms ES1 and ES2 at the Job Centre. Again the form MI12 should be completed to claim help with mortgage interest.

Other State benefits

There are a number of other benefits which might be of assistances.

Family Credit (FC) is available to families on a low or moderate income where the claimant or (partner) works 16 hours or more on average a week. The claimant (or partner) may be employed or self employed and must be married or unmarried, living with a partner or living alone. Extra is paid if the claimant or partner is working 30 hours or more. If you have children under 11 some child care costs may be ignored. However, FC is not paid if the claimant and partner have savings over £8,000.

The amount of FC payable depends on the family's income, the number of children in the family and their ages. Any savings between £3,000 and £8,000 will also affect the amount payable. It is at the same rate for 26 weeks. The amount payable will usually stay the same, even if earnings or other circumstances change during the period. FC is not a loan and does not have to be paid back.

Claims are made by post. A Family Credit pack which includes claim form FC1, is available from post offices or Benefits Agency offices.

Council Tax Benefit may also be available to help people on low income. For further details see leaflet RR2 or CTB1 which are also available from Benefits Agency offices.

What to do if your income is reduced

It is important for you to discuss your situation with your lender at the earliest possible opportunity. Sometimes, lenders will accept for an extended period a monthly payment that is reasonable in relation to income, even if it is substantially below the full amount of the mortgage. In this situation the interest not paid may be added to the outstanding loan. In some cases it may be possible to reduce your monthly payments by lengthening the term of the loan. Occasionally, lenders may add arrears to the outstanding mortgage amount rather than seeking immediate payment, or accept no payments for a short period of time.

However, lenders are not able to accept reduced mortgage payments indefinitely, and in the long term a repayment problem will not be resolved. Your lender will wish to keep in regular contact with you to keep up to date with any changes in your circumstances.

If you become unemployed, have an accident or are too sick to be able to work you should check with your lender whether you have a mortgage protection policy. This type of insurance would usually have been taken out at the same time as your mortgage and will cover your mortgage repayments up to a period of about of about 12 months.

At the same time, it is worth seeking advice from your local Benefits Agency office on whether you are eligible to claim Income Support (as described earlier on this leaflet) or any other welfare benefit. Because the new rules for IS (which came into effect in October 1995) may mean that you have to wait as long as 39 weeks before receiving this benefit it is vital that your application is made as soon as possible.

Sources of further advice

Specialist advice may be needed which cannot be obtained from your lender or you might want to see independent advice about the best possible course of action for you.

If it is likely that your family will require re-housing (if, for example, you feel you cannot maintain acceptable mortgage repayments, or where your lender possesses your property with a court order) then you will need advice on alternative housing. Many local authorities have a comprehensive housing advice centres which gives necessary information about what housing may be available. Shelter (the London Housing Aid Centre), Kingsbourne House, 229-231 High Holborn, London, WC1V 7DA (020 7404 7447) specialise in telephone advice on all problems to do with housing in the Greater London area.

Your local citizens' advice bureau should be able to help your housing and all other problems, e.g. problems with other organisations that you owe money and benefits. In some area they may refer you to their specialist money advice centre or you may approach these centres directly. The Federation of Independent Advice Centres (020 7489 1800) can put you in touch with debt counsellors in your local area. Alternatively, National Debtline, a telephone helpline, offers confidential advice on 0808 808 4000.

Your local authority may employ a Welfare Rights Officer who can help with your benefits. One voluntary organisation which specialises in advice on welfare benefits is the Child Poverty Action Group, 94 White Lion Street, London, N1 9PF (020 7837 7979).

The address of citizens' advice bureaux, money advice centres , housing aid centres and Benefits Agency offices can be found in the local telephone directories or from council offices or libraries.