Government urged to reflect borrower\'s rate in mortgage benefits
Whether in full time work or working as a contractor, with the credit crunch and recent cut backs on jobs across the board there is bound to be yet more unemployment over the next few years, leaving people with debts to pay off, and particularly those with contractor mortgages struggling to stay afloat and needing to use government benefits to help their situation in the short term.
Currently, if a person is on Jobseeker’s Allowance, Income Support or Pension Credits, they are entitled to Support for Mortgage Interest (SMI) which pays off their mortgage interest at a rate of 3.63% directly to the lender. This protects those who have become jobless from losing their homes due to being unable to meet mortgage repayments, although the benefit only pays off the interest and not the capital investment, meaning the borrower will still need to consult their mortgage broker to find out what the best course of action will be for the period that they are unemployed - to avoid getting into arrears that will be difficult to recover from even once they are back in full time employment.
When it comes to mortgages for contractors, though, every mortgage has a different rate as the mortgages are bespoke, and paying out a flat rate to the lender means some benefits are being overpaid on a regular basis, whilst others will be underpaid causing the borrower yet more trouble in the long run.
Lenders are now suggesting that the government tailors each benefit payment to the borrower’s individual rate to ensure that the correct amount of money is going to each lender and essentially saving the benefits department money in the long run.
Lenders have also suggested that in the case of overpayments, any extra money should be credited to the borrower rather than the lender, and that a 13 week entitlement waiting period should be maintained, with payments then going directly to lenders instead to claimants to ensure that there are no more missed payments than necessary.
As with most benefits, there is to be a maximum limit on payments, and lenders have suggested this be two years for benefit claimants of working age.
Article by: Rebecca Sidwell, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager.
Tel: 0844 44 88 800
Email: media@contractormortgagesuk.com
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