National mortgage-to-rent scheme
Under the mortgage-to-rent scheme, people who are having trouble paying their mortgage to a private lender can switch from owning their home to renting their home as social tenants of a housing association, which buys the home from the lender.
If you take up the mortgage-to-rent option, you will no longer own your home or have any financial interest in it.
Changes in 2017
Following a review of the mortgage-to-rent scheme, several changes were announced in February 2017. Some of these changes took effect immediately and some are due to take effect later in 2017. The changes include:
- Flexibility about the size of properties that can qualify - allowing for up to 2 bedrooms above the household’s needs (Q1 2017)
- Increased price thresholds for properties (immediate)
- Borrowers will now apply to the local authority for social housing support before submitting their application for the mortgage-to-rent scheme (Q1 2017)
- If the lender considers that the borrower is not suitable for the scheme, they will have to tell the borrower in writing why they are not considered suitable (immediate)
The review also proposed an alternative funding model for the scheme. A number of pilot projects will be initiated during 2017 with lenders, local authorities and investors who are interested in engaging in a long-term lease arrangement.
The national mortgage-to-rent scheme is for people whose mortgage is with a private lender. There is a separate mortgage-to-rent option for local authority borrowers in arrears.
For you to qualify for the national mortgage-to-rent scheme, your mortgage, home and household must meet detailed eligibility criteria, as follows:
- You must be unable to make the repayments on your mortgage loan and your lender must have decided that this situation is unlikely to change in the future
- You must be engaging with your lender to try to find a solution
- You must have completed the Mortgage Arrears Resolution Process (MARP) with your lender
- In general, your property must be in negative equity. However, a property in marginal positive equity may now be considered for inclusion in the scheme, if that equity is no more than 10% of the open market value, to a maximum of €15,000.
- Your property must suit your needs – you must not be over or under-accommodated in accordance with local authority guidelines, plus one bedroom (this will increase to 2 bedrooms, following the review of the scheme).
- Depending on the type and location of your property, it must not exceed a certain value (increased in February 2017) as set out in the following table:
|Type of property||Location||Maximum value (from February 2017)||Maximum value (before February 2017)|
|House||Dublin, Kildare, Meath, Wicklow, Louth, Cork and Galway||€365,000||€350,000|
|Apartment or townhouse||Dublin, Kildare, Meath, Wicklow, Louth, Cork and Galway||€310,000||€300,000|
|House||Elsewhere in the State||€280,000||€250,000|
|Apartment or townhouse||Elsewhere in the State||€210,000||€190,000|
- You must qualify for social housing. As part of this requirement, your net household income must not exceed certain limits, depending on which part of the State you live in and how many adults and children there are in your household. The income limits for different locations and households are in this table (pdf). Net household income is your household income after taxes and social insurance have been taken off.
- You must not own any other property or have assets in excess of €20,000
- You must have a long-term right to remain in the State (pdf)
You must get legal and financial advice before the mortgage-to-rent process can go ahead.
Your lender will pay up to €500 for legal advice.
If you wish, your lender will also pay €250 for you to get financial advice from an accountant on the Mortgage Arrears Information and Advice Service panel.
The Money Advice and Budgeting Service (MABS) can provide debt advice, as well as general information on the scheme.
How it works
Changing your status from owner to tenant of your home involves a complex set of legal and financial arrangements, all of which must be signed off before the transfer of property takes place.
When all of these arrangements have been agreed, including the purchase price of your home (see below) you voluntarily surrender possession of your home to your mortgage lender. The lender immediately sells your home to a housing association, who will then rent it to you. See ‘Housing associations’ below.
Purchase price of your home
Before your home can be sold to the housing association, it must be valued independently and the lender and the housing association must agree a price. The price will be based on several factors, including the market valuation of the property and the cost of any necessary repairs. If the lender and the housing association cannot agree a price, the arrangement will not go ahead.
After the sale
The proceeds from the sale of your home to the housing association will go towards your mortgage debt and you come to an arrangement with your lender for the remaining balance that you owe, if any. This remaining balance is now an unsecured debt. (A secured debt is a loan on which goods or property are available as security against non-payment – for example a housing mortgage, where you offer the property as security and it may be repossessed if you cannot pay the mortgage.)
You will no longer own your property but you can continue living in your home as a social housing tenant and you will have a tenancy agreement with the housing association. As with all sales of property since 1 January 2010, the date of sale, price and address of your home will be placed on the Residential Property Price Register, which is published by the Property Services Regulatory Authority.
If your financial situation improves, you will have an option to buy your home back from the housing association after 5 years.
A housing association is a registered charity and an independent not-for-profit organisation which has been approved to provide and manage social housing. Housing associations aim to provide housing for those who cannot meet their housing needs from their own resources at an affordable rent.
You will pay an affordable rent, based on your income. If your income increases the rent will increase but if your income falls then the rent payment will also reduce, in order to remain affordable.
In general, you must be eligible for social housing in order to become a housing association tenant. So, as noted in ‘Rules’ above, you must qualify for social housing in order to qualify for the mortgage-to-rent scheme.
The assessment of suitability for social housing is carried out by local authorities. Your lender can provide an application form to apply to your local authority. Following the review of the mortgage-to-rent scheme in February 2017, borrowers will have to apply for social housing support before submitting an application for the mortgage-to-rent scheme.
If your lender does not agree that you are suitable for the mortgage-to-rent scheme, you can appeal to the lender’s Appeals Committee under the Mortgage Arrears Resolution Process (MARP).
If the local authority decides that you are not eligible for social housing support (which means that you cannot access the mortgage-to-rent scheme), you can appeal this decision through the local authority’s internal appeals system. If you are not happy with the outcome, you can contact the Ombudsman.
How to apply
Where appropriate, your lender will offer you the opportunity to apply for the scheme and give you an application form for mortgage-to-rent. If you are interested, you give consent in writing to your lender to submit your details to a number of organisations involved in the scheme.
You then need to complete several steps:
- You agree to surrender ownership of your home in exchange for a tenancy agreement with a housing association
- You complete your Mortgage to Rent application form and a Social Housing Support application form and give them to your local authority along with all the required documentation, including the Proposal to Consider Participation in the Mortgage to Rent Scheme (issued to you by your lender)*
* As noted above, borrowers will shortly have to apply for social housing support before submitting an application for the mortgage-to-rent scheme.
The Housing Agency has published a Guide to the Mortgage to Rent Scheme (pdf). A new step-by-step guide will be prepared.
Where to apply
Contact your mortgage lender to discuss your suitability for the mortgage-to-rent scheme.