Little-Known Scheme Offers Support for Mortgage Interest
Thousands of households on Universal Credit are missing out on extra housing help worth £1,000s. The little-known scheme known as Support for Mortgage Interest (SMI) was extended last year, making more people eligible. Universal Credit claimants can get extra help towards their mortgage payments. It offers help with mortgage interest payments to those on Universal Credit and other benefits. But if you're on Universal Credit, SMI can help you pay the interest on up to £200,000 of your mortgage. For those on pension credit, it's up to £100,000.
Low Take-Up Despite Eligibility Expansion
The latest government figures show that 200,000 households receiving Universal Credit have mortgages. But only 1.1%, or around 12,306, have applied for SMI, according to Policy in Practice. Deven Ghelani, director and founder, said: "Despite the change in policy to broaden eligibility criteria, there has been no increase to take up despite rising mortgage rates. It is vital that people know support is available and that those advising and supporting low-income households are aware of the changes in eligibility criteria and the availability of mortgage support."
How SMI Works
In its simplest terms, SMI is a loan given by the state to individuals on benefits that they can use to pay the interest charges on their mortgage. The interest rate used to calculate the amount of SMI you'll get is currently 3.16%. For example, if you have £250,000 of your mortgage left to pay, and you're eligible for SMI for up to £200,000, at the current SMI interest rate, you'll get a loan of 3.16% of £200,000 across a year. This is £6,320 a year or £526.66 a month.
Catches to Consider
As with everything in life, there are catches to SMI. Martyn said: "First up, it's not free money – it's still a loan. The average mortgage interest rate is over 5%, but the current SMI repayment rate is just 4.5%. But it's important to know that the government can change the SMI repayment rate twice a year. If you die before you've paid off your SMI loan, it will not need to be repaid if your home is left to a surviving partner. But the loan must be repaid if your home is left to anyone else or it's sold. Of course, this option isn't available to everyone, and others may choose to go to their lenders to get help first. Even then, providers might not be aware or choose to signpost households towards SMI. Others may have enough savings to cover mortgage payments for the short term, so they might opt not to apply for any extra support. As a first port of call, we'd still recommend that you speak to your lender as soon as you think you will have a problem with your monthly repayments. This way, they may be able to point you to support, which comes with less of a catch."
Who's Eligible and How to Apply
Support for mortgage interest or SMI helps those on Universal Credit – and other benefits – by giving them a low-interest loan. To be eligible for an SMI loan, you need to be getting one of the following qualifying benefits: Income support, income-based jobseeker's allowance (JSA), income-related employment and support allowance (ESA), Universal Credit, or pension credit. Contact the office that pays your benefit to find out if you could get an SMI loan. If you get or have applied for income support, income-based JSA, or income-related ESA, contact Jobcentre Plus. If you get or have applied for pension credit, contact the Pension Service. If you get or have applied for Universal Credit, add a message to your journal on your Universal Credit account or contact the Universal Credit helpline.
Other Mortgage Help Available
If you are struggling with your mortgage payments, there are other options available. Under the government's Mortgage Charter, you can temporarily switch your mortgage to interest-only or extend your term to bring monthly payments down. You can ask your lender about the breathing space scheme if you find payments unaffordable. Many local councils have Welfare Assistance schemes to help struggling families. Check with your council to see if you are eligible. It's also important to check if you're entitled to all the benefits available. Make use of free calculators like Entitledto's and StepChange's benefits checker to find out.
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