With people feeling the pinch more than ever, now is a great time to check if you are receiving all your benefit entitlements. For homeowners paying a mortgage and receiving certain benefits, there is assistance available in the form of the Support for Mortgage Interest (SMI) loan. This is an advance that helps people cover their mortgage and other loan payments. Let’s dive in to see how this scheme works and how it can make things easier for homeowners.
What Is the Support for Mortgage Interest (SMI) Loan?
Known as “the government help with mortgage”, this scheme helps homeowners to pay the interest portion of their mortgage or loans taken for certain improvements and repairs to the home. Eligible people will receive help to pay the interest for up to £200k of their loan or mortgage. The money is given in the form of an interest-accruing loan that must be repaid back later.
Qualifying Criteria
The UK homeowner must be receiving one of the following benefits to qualify:
- Universal Credit
- Pension Credit
- Income Support
- Jobseekers Allowance that’s income-based
- Employment and Support Allowance that’s income-related
Note: Universal Credit has taken over Income Support. Any new claimants must apply for Universal Credit.
When Can the Loan Start?
When the home loan can begin is dependent on the benefit claimed by the applicant. For example, for those receiving:
- Pension Credit, the loan can begin when the pension credit starts.
- Universal Credit, the loan can only start after 9 straight months of payments.
- Other benefits (Income support, Jobseekers Allowance, and Employment and Support Allowance), the loan can start 39 weeks after claiming their benefit.
Exceptions for Universal Credit Claimants
Any Universal Credit mortgage applicants with the following circumstances will not qualify:
- Wages through a job or self-employment
- Statutory Pay for these situations:
- Sickness
- Maternity
- Paternity
- Adoption
- Parenthood
If they are already receiving the SMI loan, the payment will stop.
Exemptions for Those Without a Qualifying Benefit
People who apply but fail to receive a qualifying benefit because of high-income levels can still receive the SMI loan. In such instances, they are regarded as receiving the qualifying benefit.
Applying for the Support for Mortgage Interest Loan
When an application is made for a qualifying benefit, housing costs are queried to determine if a person can obtain SMI. Additionally, when applying, the Department for Work and Pensions (DWP), may send a form to complete to gather more information.
You can apply for the qualifying benefits through this link. If you’ve been receiving any qualifying benefits for a while and did not consider SMI at the time of the application, contact the appropriate body to see if you are still eligible for the loan.
Where Can I Get Help with My Application?
- If you receive Universal Credit, contact the Universal Credit helpline. The telephone number is 0800 3285644,
- If you receive Pension Credit call the Pension Service. The phone number is 0800 7310469,
- If you receive Income Support, Jobseeker’s Allowance, or Employment and Support Allowance, contact Jobcentre Plus. The telephone number is 0800 1690310.
What Happens If the Application Is Successful?
You will be given the opportunity to take the loan if you qualify. It is always possible to refuse the offer and accept it later as long as you still qualify for the SMI. The payments will get backdated to the time when you became eligible.
Paying Back the Loan
Loan repayment is completed when the home is sold, or ownership transfer occurs (unless the loan is moved to another home). The loan has an interest rate of 3.03%, and the rates are always subject to change (this means they can go up and down). The interest rate is favourable compared to the average mortgage rates from the banks.
Selling the Home
You will have to repay the loan when the home is sold. But you’ll only pay after the following deductions are taken into consideration:
- Paying off the mortgage
- Paying off any loans taken for home improvements and repairs
- Paying off any secured loans obtained by using the home as collateral
After paying these charges, the loan is repaid. If the money left is less than the SMI loan, you only pay back that amount.
Purchasing a New House
If you are buying a new house, it may be possible to transfer the SMI loan to the new property. Contact “DWP Loan Management” and provide your solicitor details, who will work with them to find new arrangements. You can contact DWP Loan Management at 0800 9160567 or by post:
SMI Loan Management
Post Handling Site A
Wolverhampton
WV98 2DS
Paying Back Voluntarily
To ensure the loan is paid back quickly, the homeowner can pay the outstanding amounts voluntarily. The minimum repayment is £100 each time payments are made.
Last Thoughts
Receiving and taking advantage of benefits is a good idea as it is tax-free, and there is no need to repay the financial help. Support For Mortgage Interest is different as the monies have to be returned with interest on top of the sum borrowed. That leads some people to ask, “Is it worth it?” For those struggling to pay their mortgage, it is without a doubt a great idea. It will ensure they are housed, the dwelling is not repossessed, and the person continues to stay on the property ladder.
