Mortgage to rent schemes

A guide to Mortgage to rent schemes

If you are in danger of having your home repossessed, the Scottish Government's mortgage to rent scheme could allow you to remain in your home as a tenant. This page explains how the scheme works and who is eligible to apply.

What is the mortgage to rent scheme?

The mortgage to rent scheme is run by the Scottish Government as part of the Home Owner Support Fund. The scheme aims to help people, whose homes are at risk of being repossessed, to stay in their homes.

If you apply successfully for the mortgage to rent scheme, your home will be bought by the council or a housing association, but you will continue to live there as a tenant. Your new landlord will receive funding from the Scottish Government to carry out any necessary repairs so they can charge you a reasonable rent. 

How do I apply?

Before you apply, you must get advice about your financial situation from either the Citizens Advice Bureau, a debt advice service or a solicitor, or your local council or other advice agency. Use the Getting debt advice - Shelter Scotland to find an agency near you. An adviser should be able to give you an application form and help you fill it in.

You can also get a form direct from the Home Owners' Support Fund or write to:

Home Owners' Support Fund Team
The Scottish Government
Highlander House
58 Waterloo Street
Glasgow
G2 7DA

Tel: 0300 244 1093
email: HOSF@gov.scot

Who can apply?

You can apply to the mortgage to rent scheme if the following criteria apply:

• you are at least 3 months in arrears of loans secured on your property and have gradually built up arrears of totalling one month
• a trustee appointed to your estate is going to force the sale of your house
• failed to reach agreement with your mortgage lender over how to manage your arrears
• have received independent financial advice, from either Citizens Advice Bureau or Money Advice centre
• all joint owners of the property agree to apply to the scheme and have signed the application form
• the property is your only or main home, or the only or main home of someone else in your household
• you or someone else in your household has lived there for at least a year
• neither you or your partner (including a same sex partner) has capital of more than £2,000 if you're under 60, and £4,000 if you're over 60. Capital includes savings, shares, premium bonds, redundancy payments and other investments but doesn't include personal pension schemes or any savings plans that are linked to your mortgage, such as an ISA or endowment policy.
• the value of your property is lower than the average property value in your area. your money adviser will inform you of this value. If there are more than five people living in your house or the house is more expensive due to the needs of a disabled person, this condition will be ignored.
• your property needs no more than £6,000 worth of repairs done to it. If you can fund some of the repair work yourself, you will still be eligible to apply.
• Your home is suitable for the needs of your household, for example, it isn't overcrowded and it meets the needs of anyone in your household who's disabled.

You won't be eligible for the mortgage to rent scheme if you own your home with someone else and they are forcing the sale of the property (for example, due to relationship breakdown).

How does the process work?

Your application will be reviewed by the mortgage to rent team. They will carry out an initial assessment of your application, to see if it meets the relevant criteria. If your application is considered eligible for the scheme, a more detailed assessment will be carried out. At this point, the most appropriate potential landlord will be identified and a survey of the property will be done. If the detailed assessment is positive, the process of selling the property will begin.

How much will my home be sold for?

You will be paid the open market value for your home, taking into account the costs of any repairs that need to be done. This is the amount of money you could have expected to get had you sold the home yourself to a private buyer. Your selling costs (for example, your solicitor's fees) will also be covered.

You must use the money to pay off any loans secured against the house, beginning of course with your mortgage and any mortgage arrears. If your debts are higher than the amount your house is sold for, you will still be responsible for paying the difference.

What if there is money left over once I've paid off my debts?

Any money left over after you have repaid your mortgage and any loans secured on your property is called equity. Any equity will be added to the amount of capital you have, along with the surrender value of any savings plans linked to your mortgage. If this brings your capital to more than £8,000 (if you're under 60) or £12,000 (if you're 60 and above), you will have to pay the extra money to the mortgage to rent scheme to help with costs.

When will I become a tenant?

Once the buying process is completed, you will become a tenant of the new landlord. Your tenancy will begin on the date that the sale is finally concluded.

What rights will I have as a tenant?

As you will be renting your home from the council or a housing association, you will be a Scottish secure tenant, or, in rare circumstances, a short Scottish secure tenant.

Will I be able to claim housing benefit?

You can apply to the council for housing benefit in the normal way. The council may claim that, because you are paying rent for a property you used to own, you won't be eligible for housing benefit, so you will have to prove that you had no option but to sell your home. The mortgage to rent team can contact the council on your behalf to back up your case.

Will I be able to buy my house back?

After you have been a tenant for five years, you may gain the right to buy your home back. However, there may be restrictions in some areas, so check this when you apply to the scheme.

What if I'm turned down for the scheme?

If the mortgage to rent team decide that you are not eligible to take part in the scheme, you will be sent a letter telling you this and also explaining the reasons why. You will not be able to appeal against the decision. However, you will be able to lodge a complaint. To complain you should contact:

Home Owners' Support Fund Team
The Scottish Government
Highlander House
58 Waterloo Street
Glasgow
G2 7DA

Tel: 0300 244 1093
email: HOSF@gov.scot

You will also be advised to speak to your mortgage lender or money adviser about your money problems generally.

Where can I find out more?

Visit the Scottish Government's Home Owners' Support Fund page and download the mortgage to rent guide for more detailed information.