Support for mortgage interest payments
If you are claiming certain benefits, you may be able to get help with your mortgage interest payments. This type of help is often referred to as ‘help with housing costs’, support for mortgage interest (SMI) or income support mortgage interest (ISMI) payments.
SMI can only help you to pay the interest on your mortgage. It generally cannot be used to pay off the amount you borrowed (the capital). Even if you receive SMI it is still very likely that you will have to make some payments towards your mortgage.
Since 6th April 2018, the way SMI is paid has changed. New SMI payments are paid as a loan which you have to repay. Before this date SMI was paid as a benefit that did not have to be repaid. It’s your responsibility to make sure your mortgage interest is paid from 6 April 2018. If you are worried about this change then get urgent advice.
Am I eligible for SMI?
In order to qualify for SMI, you (or your partner) need to be claiming one of the following benefits:
- Income Support
- income-based Jobseeker’s Allowance
- income-related Employment and Support Allowance
- Pension Credit
- Universal Credit.
Can I claim help with loans other than my main mortgage?
You may also be able to get payments towards the interest on loans you took out for:
- essential repairs or improvements to your home (for example for insulation, repairing dangerous faults or adapting your home if someone in your household is ill or disabled), or
- buying your ex-partner’s share in your home if you have separated. Again, you won’t get help to pay off the loans themselves.
Loans for essential repairs or improvements may be covered even if you take them out after you claim a qualifying benefit.
How long do I have to wait before help starts?
You might have to wait for a number of weeks before payments of SMI can start. How long you wait depends on what benefit you are receiving:
- If you are claiming Pension Credit : payments can start immediately
- If you are claiming Income Support, income based Jobseeker’s Allowance or income related Employment and Support Allowance : payments normally start 39 weeks after you started claiming
- If you are on Universal Credit : payments start 9 months after you start claiming.
What percentage rate is used to calculate payments?
The interest rate used to calculate SMI is set at the Bank of England’s average mortgage rate – currently 2.61%. Check Gov.uk for any changes in this rate.
If the interest rate on your mortgage is higher than the SMI interest rate, then the amount you receive will not be enough to cover your mortgage interest payments. In this situation, you will still have to pay the remaining interest that is due. If you can’t afford to do this, ask your lender if they will just accept the SMI for the time being until you can make up the full amount at a later date.
If the interest rate on your mortgage is lower than the SMI interest rate, you may be able to repay some of the capital you owe.
How much of my mortgage is covered?
You can usually claim help with interest payments on loans up to:
- £200,000 if you’re of working age
- £100,000 if you receive pension credit.
If you claimed SMI as part of another benefit in the 12 weeks before you claimed pension credit, you may still be able to claim help on loans up to £200,000.
SMI is not intended to repay the capital you originally borrowed or pay towards any investment linked to your mortgage (such as an endowment policy, pension or ISA).
How do I claim?
If you are applying for Universal Credit, then you can include a claim for SMI as the ‘housing costs’ element of your claim. You will probably have to apply online.
When you apply for Income Support, income-based Jobseeker’s Allowance, Pension Credit or Universal Credit you will need to include information about your mortgage and housing costs in order to be offered the payments. You will have to provide proof of your income, details of your financial situation and any related paperwork. Your lender will have to complete some of the forms confirming the details of your loan.
If you are already receiving these benefits but are not getting any extra payments towards your housing costs, contact your local Jobcentre Plus office or the Pension Service or the Universal Credit helpline (0800 328 5644) and ask them if you qualify.
How is it paid, and how long for?
Payments of SMI are usually made at the end of every four weeks, and are normally paid direct to your lender. This is the case even if your mortgage payments are due on a monthly basis, so you may appear to be behind with payments.
If you are receiving Jobseeker’s Allowance and you claimed after 5 January 2009, you will only be able to claim help with housing costs for up to two years. There is no time limit if you claimed before that date or are receiving Income Support, Pension Credit or income-related Employment and Support Allowance.
If your benefits are stopping because you are starting full-time work or are earning more money, your SMI will also stop but you may qualify for Mortgage Interest Run On payments for the next 4 weeks. Click here for more details.
Since the 6 April 2018, payments of SMI are made as loans rather than as part of your benefit.
If you are already claiming SMI you should have been written to at the beginning of 2018 and offered a loan agreement. If you have accepted the loan, the payments of SMI should be the same as you had before but they will have to be paid back, together with interest.
If you are worried about getting SMI as a loan then seek advice. Don’t rush in to agreeing to a loan if you are not sure it is right for you. There might be other options to help you pay the interest that you can discuss with your lender.
How much do I have to pay back and when?
Since the 6 April 2018, SMI is paid as a loan, rather than a benefit. This means that you have to repay any payments made, together with interest. The current rate of interest added to the loan is 1.5% but this may go up or down.
If you agree to having SMI as a loan, the DWP may put a second charge on your home. This means that you will have to pay back the payments when you sell or transfer ownership of your home.
If you are able to pay the loan back more quickly, you can also make voluntary repayments (the minimum you can repay at any one time is £100). Contact DWP Loan Repayment – 0800 916 0567 if you want to find out more about doing this.
If there isn’t enough money from the sale of your home to repay the SMI loan in full, the rest of the loan will be written off and you won’t have to repay it.
You can ask to stop getting SMI loan payments at any time.
What about Housing Benefit?
Housing Benefit only covers rent payments, so you can’t claim Housing Benefit to pay your mortgage. However, if you bought your home through a shared ownership scheme, you may be able to get Housing Benefit to help pay the rent on the share you do not own.