Homeowners Mortgage Support FAQs

What is Homeowners Mortgage Support?
How does it work?
Is it a payment holiday?
Are there any risks?
Why is independent money advice so important?
Will HMS help me avoid repossession?
What would my monthly payments be when I am on the scheme?
How do I pay back the money I’ve postponed?
Is my lender taking part?
Can anyone sign up?
Does it matter what my interest rate is?
Do I have to switch to an interest only mortgage?
Will my repayment change while I’m on the scheme?
Does it only last for two years?
Is this my only choice?
I think I’m eligible, but my lender won’t let me sign up. What can I do?
I’ve got other loans secured against my house, as well as my mortgage. Can I still apply?
I’m in negative equity – can I still apply?
Are there any charges for Homeowners Mortgage Support?

What is Homeowners Mortgage Support?

Homeowners Mortgage Support (HMS) is the latest Government initiative to help people at risk of having their homes repossessed. The scheme is available to people who have recently experienced a sharp drop in their income, such as overtime payments cut or working hours reduced. This scheme is a last resort after people have explored all other options with their mortgage lender.

How does it work?

Homeowners Mortgage Support enables homeowners to postpone part of their interest payment for up to two years. The postponed payments are added onto the remaining balance of your mortgage, to be paid back when your situation improves.

Mortgage lenders will work with households who are having difficulty paying their mortgage to help them avoid repossession. This is commonly known as ‘forbearance’. HMS is a type of ‘extended forbearance’, which means lenders are offering longer than usual for borrowers having difficulties getting back on their feet.

Is it a payment holiday?

No, as a homeowner is expected to keep paying as much as they can afford each month. Homeowners Mortgage Support will reduce monthly mortgage payments for up to two years, but any money not paid during this period will have to be paid off eventually.

Are there any risks?

Yes, there are risks as well as benefits. The main risks are:

An increase in debt, with interest charged on the postponed payments. A homeowner will end up paying more than when they took out their mortgage.
A homeowner must be confident that their financial circumstances will improve and that they will be able to manage increased payments in the future.
If a homeowner does not keep up with their reduced repayments, then they may still be at risk of repossession.
If a homeowner has their property repossessed in the future, their debt may be larger because they have deferred payments and their home may have declined in value due to the changing housing market. If a homeowner’s property is worth less than the mortgage, the homeowner may still owe the lender money even after repossession.

Homeowner should explore their options with their mortgage lenders to decide if the potential benefits outweigh these risks. Independent advice from an accountant may help – some mortgage lenders will insist homeowners gather independent advice before applying.

Why is independent money advice so important?

Your lender will want to be sure that you have fully understood all the risks as well as the benefits of joining the scheme.

Independent money advice will help you make an informed choice. Your mortgage lender cannot tell you whether or you should or shouldn’t apply for this scheme, that is ultimately your decision.

Money advice covers general debt advice, as well as advice about mortgages and will be generally be provided by a financial advisor. Your advisor can also help you improve your overall financial situation by developing a suitable budget or helping you apply for benefits.

Will HMS help me avoid repossession?

HMS may reduce the risk of repossession, by helping homeowners meet monthly mortgage payments. The scheme also allows time to for homeowners to get their finances back on track.

However, HMS will not eliminate the risk entirely. If your financial situation worsens, or if you are not able to return to increased payments after two years, your home may still be repossessed.

What would my monthly payments be when I am on the scheme?

This is dependent on individual circumstances. Mortgage lenders will take into account current interest repayments as well as new financial circumstances.

As a minimum, you will have to pay back thirty per cent of the interest due each month. But it is in your interest to pay back as much as possible.

How do I pay back the money I’ve postponed?

Individual lenders will decide how this money is to be paid back. Your lender will work with you to agree a reasonable and affordable repayment schedule to pay off your mortgage plus any amount that you have deferred. Some lenders may extend the term of the mortgage or spread out repayments over the existing term.

Is my lender taking part?

Some lenders will be offering HMS or an equivalent from 21 April 2009. It expected others will soon follow suit. Check www.direct.gov.uk/HMS, or call your lender to find out if are offering HMS or an equivalent.

Can anyone sign up?

No, this is a short-term solution for people who have had an ‘income shock’ but who believe they can get their finances back on track in the future.

Mortgage lenders may also have other terms and conditions, such as the mortgage and any other loans secured against a property must not be more than a certain amount; or an individual’s savings must be below a certain level. You will need to check these details with your lender.

Does it matter what my interest rate is?

No, having a high interest rate does not automatically make you ineligible for the scheme. But you must be able to pay at least thirty percent of the interest due. If your lender believes that you are eligible for this support, then they will explain how much you are able to postpone, and how much you would pay back each month.

Do I have to switch to an interest only mortgage?

Yes, if you are not already on an interest only mortgage, then you will need change. HMS only lets you defer your interest payments. Transferring to an interest only mortgage will also help reduce the payments overall.

Over the long term, you will need to make arrangements for paying back the capital too. In most circumstances, that would mean returning to a capital repayment mortgage once you have left the scheme.

Will my repayment change while I’m on the scheme?

You must commit to paying a proportion of the interest, not a fixed amount each month. This means that if you have a variable or tracker rate mortgage and interest rates go down, you may be paying less. However, if interest rates go up, you will need to pay more. It is in your best interest to pay back as much as possible each month.

Does it only last for two years?

No, two years is the maximum amount of time you can make the reduced repayments, but if your circumstances change, you will need to re-assess to see if this scheme is still appropriate. For example, if your financial situation improves, it is in your own interest to pay more back each month, and return to normal payments if possible.

If your circumstances worsen, and you can no longer keep up with these lower repayments, you and your lender will need to revisit whether another option – like Mortgage Rescue – might be more appropriate.

Is this my only choice?

No, HMS is just one option for people in certain financial circumstances. If you are worried about keeping up with your mortgage payments, the first thing to do is talk to your lender – they will help you explore all options. In some cases, your mortgage lender may be able to offer you a payment holiday or work out an alternative payment plan. There are also other Government schemes available, depending on your circumstances.

I think I’m eligible, but my lender won’t let me sign up. What can I do?

Your lender ultimately has discretion over to whether to let you participate. For example, if they don’t think your earnings will return to the same level, and that you won’t be able to keep up with repayments over the long term, they may not let you cut your repayments. However, your lender must still explore all other alternatives before starting repossessions proceedings.

I’ve got other loans secured against my house, as well as my mortgage. Can I still apply?

Yes, but only if all the lenders involved agree. You, your independent financial adviser and your lenders will need to develop a sensible repayment plan so that all lenders are receiving regular payments. How much you pay to each lender will depend on your individual circumstances. You will need to discuss the details with your money adviser who may be able to help you negotiate with your lenders.

I’m in negative equity – can I still apply?

If you are already in negative equity you are not automatically excluded from applying. However, you will need to consider carefully with your money adviser and lender if HMS is right for you. This scheme will increase your debt and may leave you in a worse position than you are in now.

Are there any charges for Homeowners Mortgage Support?

There are no charges associated with applying for this scheme. However, your mortgage lender may charge other fees, depending on the terms of your original mortgage contract.

Page updated: 15 Jun 2010