From 21 April, certain homeowners can reduce their monthly mortgage payments, add the amount of the deferred payments to their loan, and pay it later when their financial circumstances improve.
If your income has temporarily reduced – for example, your hours have been cut or your two-income household has reduced to one - you may be able to delay paying part of the monthly interest payments on your mortgage for up to two years.
The delayed interest is added to the principal sum due on your mortgage, as if it was part of the original sum you borrowed from your lender. When you go back to your normal monthly payments, you agree with your lender how you’ll pay it back. You may have to increase your monthly payments or lengthen your mortgage, so you pay the same each month but for longer.
The conditions you must meet are:
- You have had a temporary drop in income and cannot make your monthly mortgage payments.
- You either have an interest-only mortgage, or will switch to one. • You still pay as much as you can afford each month.
Individual lenders may have other conditions – for example, that any savings you have are only small amounts. And not all lenders are offering HMS – you need to check whether yours is.
You won't qualify for HMS if:
- You own more than one home.
- Your reduction in income is permanent – for example, because you have a long-term illness.
- You have mortgage payment protection insurance.
- In your lender’s view, you won't be able to make the reduced monthly payments either.
- You are on Jobseeker's Allowance (in which case you can claim ‘support for mortgage interest’ (SMI) instead).
Even if you are eligible for HMS your lender may suggest other options, and they will usually refer you to the Consumer Credit Counselling Service, or some other independent money adviser in any event.
If you go ahead you will need to:
- Renegotiate your monthly mortgage payments to an amount you can afford.
- Agree to pay at least 30 per cent of the interest due on your mortgage each month.
- Agree the period (up to two years) that you will pay reduced interest.
- Tell your lender if your financial circumstances change.
- Have a review of your circumstances after a year with your lender.
Click the link to find out more about SMI: http://www.jobcentreplus.gov.uk/JCP/Customers/WorkingAgeBenefits/Dev_016128.xml