Who is eligible for the mortgage to rent scheme?

Before applying to the scheme, the applicant must have sought advice on her/his general financial situation, for example, from an adviser at a Citizens Advice Bureau, Money Advice Scotland centre or local authority money advice centre. The aim of this is to identify whether s/he has access to other options before considering the mortgage to rent scheme.

The home owner must demonstrate that the adviser has discussed all of the potential options with her/him and determined that the only course of action is an application to the mortgage to rent scheme. The mortgage to rent team may check with the advice agency to ensure that the applicant has taken advice on the full range of her/his options.[1]

The applicant must have been unable to make full payments on her/his mortgage, or any other loan secured on the home, for three months, and have accumulative arrears of at least one month. The applicant must have discussed the situation with her/his lender, but have been unable to reach a suitable agreement to resolve the situation, for example, by setting up a repayment plan to clear the arrears, or reducing monthly payments by extending the term of the mortgage or switching to interest only payments.

This criterion is waived if a trustee has been appointed to the estate, in cases of bankruptcy, and is looking to force the sale of the property. [2]

The home must be valued below the maximum price for a property of its size, as set by the Scottish Government. However, if the applicant is disabled and has particular needs, s/he may still be eligible if her/his home is valued at a higher price.

The applicant must be ineligible for help through any other UK Government schemes. For example, s/he must be unable to claim support for mortgage interest.[3]

The applicant must hold less than 25% equity in the property, unless a trustee has been appointed to the estate, or her/his mortgage is not a capital and interest mortgage.[4]

The agreement of all the owners is necessary to ensure that there are no legal barriers that could prevent the landlord taking ownership of the property. All the owners must sign the application form to make clear the agreement.[5] This includes the owner's wife, husband, civil partner or co-habitee with occupancy rights.[6]

The property must be the sole or main residence of at least one of the owners (in the case of joint owners) or the owner's wife, husband, civil partner or co-habitee, and s/he must be planning on staying in the property. It is unlikely that the applicant will be successful if s/he own a second home.[7]

There are different capital limits depending upon the age of the applicant. If s/he is under 60, s/he must not have capital of more than £2,000. If s/he is 60 or over, s/he must not have capital of more than £4,000.[8] Capital includes:

• cash and money in bank and building society accounts, premium bonds, stocks and shares and other investments

• life insurance or endowment policies not linked to the mortgage (unless the financial difficulties are caused by ill health, the policy holder is terminally ill and the policy is providing life cover)

• equity in any property

• redundancy and pension lump sum payments.[9]

In order for the local authority or registered social landlord to purchase the property and let it back to the applicant as a tenant, the property must meet the required standard of repair. This includes gas and electrical safety and the property must meet the tolerable standard.[10]

Repairs identified to bring a property up to the specified standard of the scheme will be subsidised to a maximum cost of £6,000.[11] If the repair costs are likely to be higher than this the home owner will be ineligible to participate in the scheme unless s/he can fund the additional costs. Alternatively, the lender could be approached to reduce the purchase price and come to an agreement with the home owner to repay the difference, or the landlord could fund the difference. If additional funding cannot be found, then the home owner is not eligible to participate in the scheme.