The enhanced mortgage-to-rent scheme launched by mortgage campaigner David Hall offers hope to thousands of families trapped in an arrears nightmare.
The scheme enables a housing body take over the ownership of homes where mortgage holders are deep in arrears, with no prospect of getting back on track.
How does it work?
David Hall, of the Irish Mortgage Holders Organisation, has set up iCare Housing to buy homes off people in deep arrears. This is the first time the scheme is being operated on such a large scale.
He has funding from AIB Corporate Finance to run the enhanced mortgage-to-rent scheme initially for customers of AIB and its subsidiaries EBS and Haven.
Those who opt for the scheme will lose ownership of their homes. The homeowner must voluntarily surrender their home to the lender.
The lender, in this case AIB, then sells it to the approved housing body, such as iCare, at a discount to market rates. Those who take it up go from being a homeowner to being a tenant of an approved housing body.
How do I qualify?
Borrowers must be eligible for social housing. This means the property must be of a value no more than €365,000 for a house and €310,000 for an apartment or townhouse in Dublin, Kildare, Meath, Wicklow, Louth, Cork and Galway. The maximum values for the remainder of the country are €280,000 for a house. They must not own any other property.
The net income for a family in Dublin must be less than €42,000. In Co Cork, the income limit is €36,000 for a family.
To qualify, the property will be in negative or marginal positive equity. The mortgage debt must be deemed unsustainable.
Who owns the property?
The property will be owned by iCare. People in the scheme will have a 30-year lease with iCare, and pay rent to it. If you qualify for the scheme, and you agree to it, your arrears will be written off.
There will be an option for those who are in the scheme to buy back the home in future at a discount to today’s market value.
How much will the rent be?
You will pay what is called a differential rent to iCare. This means the amount of rent you pay depends on the amount of your total household income.
If your income is low, your rent payment will reflect this and will be low, but if your income increases so will your rent payment.
Mr Hall expects to agree deals with the local authorities. Where people in the scheme have no funds, up to 92pc of the rent can be paid to iCare by the local authority.
How is the deal being financed?
The homes will be bought at a discount from the lenders.
AIB Corporate Finance is providing funding for iCare Housing, which could rise to €100m if the scheme works out. There is also funding coming from the State’s Housing Agency, under a Capital Advance Leasing Facility. The funding works out at up to 40pc of the value of the homes. The interest on this is 2pc, and the first repayment is not due for 30 years.
Will other lenders take it up?
Housing Minister Eoghan Murphy called on other lenders to take it up. Mr Hall said he was in talks with Bank of Ireland and some vulture funds about taking over properties, where the owners are in arrears, and operating the mortgage-to-rent scheme.
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