Find out how you may be able to defer payments on your mortgage if you experience a sudden drop in income.
Homeowners Mortgage Support, or HMS, has been made available by the Government since April 2009. It provides homeowners with a way of delaying repayments on their mortgage for up to 2 years, following a sudden significant drop in income.
This is intended to cut down on the number of repossessions in the UK during the economic downturn.
Who is eligible for HMS?
Homeowners Mortgage Support is available for people who are struggling to meet repayments on their mortgage due to a sudden, temporary drop in income, but who are likely to regain their financial footing in the near future.
For example, you could be eligible if you now have to rely on one income instead of two due to a job loss, or if you have had your hours cut, or are no longer able to work over-time.
You will have to meet the following criteria to claim:
- You must have had a temporary drop in income and be unable to meet your monthly repayments on your mortgage.
- You must commit to paying back as much as you can afford each month.
- You must have bought your home before 1st December, 2008.
- You must have an outstanding mortgage of less than £400,000, and savings of less than £16,000.
- You must have been making regular payments on your mortgage for a minimum of 5 months.
You won’t be eligible for HMS if:
- You own more than one home.
- Your income is unlikely to return to its previous level in the near future.
- You have insurance that protects your mortgage payments.
- You are claiming Job Seekers’ Allowance (in which case you can claim Support for Mortgage Interest instead).
How do I apply?
In the first instance you will have to speak to your mortgage lender to discuss the possibility of claiming HMS. Bear in mind though that not every lender is participating in the scheme. You can find a list of those who are offering HMS on the Direct.gov website.
You will then usually be referred to an independent money adviser who will discuss your situation with you further. If you are successful in your claim, you’ll have to switch to an interest-only mortgage if you haven’t already done so.
Your lender will then delay some of the monthly interest due on your mortgage, reducing your payments for up to 2 years.
You’ll be required to inform your lender if your financial situation changes in any way while you are participating in the scheme, and will have a review with your lender after a year to determine whether or not you still need to defer your payments.
What else should I consider?
Bear in mind that although Homeowners Mortgage Support can provide you with temporary relief while you are going through a difficult period, the drawbacks may outweigh the benefits. Your payments will not be written off; rather they will just be delayed until you are in a position to return to your normal payments.
At that point you’ll have to agree with your lender either to increase your monthly payments or the length of your mortgage, in order to pay back what you deferred. The delay in payments means you will be adding to your debt and will end up paying more for your mortgage overall.
