How scheme will work for those at risk of losing home

Stock image

A new option has been offered for those in deep arrears. Anyone considering the scheme would be wise to get independent financial advice. Here is how it works:

Q: What is this latest scheme to help those in mortgage distress?

A: The Arizun 'Stay In Your Home' solution is a private rental scheme targeted at people who are in deep mortgage arrears which they will never be able to pay off. They earn enough money to meet their day-to-day needs, but do not qualify for State or social housing.

Q: Why do they not qualify for the State-supported mortgage-to-rent deal?

A: To qualify for the conventional mortgage-to-rent scheme you must have an income low enough to qualify for social housing. The house has to be under a certain value, and there are restrictions on the size of house that will be accepted for the scheme. The State funds the purchase of the home, with a local authority or housing association subsidising the rental payment.

Q: How does the new scheme work?

A: People in deep mortgage arrears apply to Arizun to be included. Because there is likely to be large amounts of arrears on the mortgage, they are probably in negative equity. Arizun buys the mortgage from the bank, if the homeowners agree to hand over the title deeds.

The debt-stricken family will then have their arrears and mortgage debt written off. The family gets a long-term lease, that can be extended every six years. They pay a market rent based on the value of the house. Within the first six years, they have the option of repurchasing the home with a 40pc share in any capital appreciation to go towards a mortgage deposit.

Q: Give me an example.

A: Mary is separated from her husband, who was declared bankrupt. This means he is not contributing to the mortgage. She owes €400,000 on the mortgage, which includes arrears. The home is only worth €250,000.

Mary faces losing the home, which is now in her name.

She runs her own business and earns too much to qualify for the State-backed mortgage-to-rent scheme. She signs up to the Arizun scheme. She surrenders the title of the house to Arizun which clears the mortgage, and enters a long-term lease of six years which can be renewed indefinitely. Based on the value of her home, she pays €1,200 a month in rent. Rents will be reviewed every two years, in line with consumer price index increases. Arizun takes care of maintenance issues.

Q: Is Arizun a hedge fund?

A: No, it is backed by London-based investment house LCM. The Arizun fund is regulated by the Central Bank.