If you’ve run into financial difficulty – for example, you and/or your partner have been made redundant – and you’re struggling to pay your monthly mortgage repayments, you might be able to get help from the government’s Support for Mortgage Interest (SMI) scheme.
Unfamiliar with the initiative? Here’s what you need to know…
First up, what exactly is SMI?
SMI is a loan from the government designed to help homeowners finding it difficult to meet their mortgage repayments.
It covers interest payments (not the actual mortgage) on the first £200,000 of the outstanding mortgage, and the level of interest paid on the loan is set by the government and not the mortgage lender, which is currently 2.61%*.
Up until 6 April 2018, SMI was paid as a benefit, meaning it didn’t need to be paid back. However, as of the new financial year it’s now considered a loan.
This means you’ll have to pay the loan back (plus interest) when you sell or transfer ownership of your home.
To be eligible for SMI, you must be receiving one of these benefits:
- Income support
- Income-based Jobseeker’s allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Universal Credit
- Pension Credit
This means if you’ve currently lost your job, you must sign on at your local Job Centre if you receive Income Support, or Pensions Office if you receive Pensions Credit. If you claim Universal Credit, you can only get SMI if you’ve claimed the benefit and paid your mortgage for nine months.
Are there any exemptions?
Yes – you can’t get SMI if you have over £16,000 in savings, or if you own multiple residential properties.
Also, if you’re claiming Pension Credit, you can only get help on the first £100,000 of your outstanding mortgage.
When will you receive your first payment?
There’s a 39-week wait between claiming SMI and receiving your first payment, which will typically go to your mortgage lender rather than straight into your bank account.
This is different if you’re claiming Pension Credit, however, as you’ll get help straight away.
If you take up any paid work during the 39 weeks, the waiting period will come to a halt and continue again when you stop working.
How long can you get SMI for?
There’s no limit to how long you can get SMI if you receive Income Support, ESA, or Universal or Pension Credit.
But if you’re claiming Jobseeker’s Allowance, you can only benefit from the scheme for a maximum of two years.
Is the loan just for mortgage repayments?
No – homeowners can get SMI to cover the interest on a loan taken out for essential repairs or home improvements, such as fixing a dangerous fault or adapting the building for a disabled person.
The same goes if someone splits from their partner and buys their share in the property.
How and when do you pay back the loan?
As mentioned, you’ll need to pay the loan back in full when you sell your home or transfer its ownership.
If you die and your house gets passed on to your civil partner or spouse, the loan can be paid back when they die – the Department for Work and Pensions will recover the amount from the sale of your home.
You also have the option to pay back the loan at any time – for instance, if you find employment again and are able to make the repayments.
There’s a minimum repayment limit of £100 or the outstanding balance, whichever is less.
Bear in mind your SMI loan will accrue interest every month. The rate of interest is variable and will impact the overall amount of interest you pay on the loan.
Interested? What to do next…
Before claiming SMI, it’s worth speaking with your mortgage lender to see if they offer any financial relief, for instance, mortgage payment holidays.
You must notify your lender immediately if you’re struggling with payments.
If you want to go down the SMI route, we strongly recommend having a thorough read of the terms and conditions on the Gov.uk website. Then, if you’re happy with everything, you can make a claim from there.
*We’re not responsible for the content of other websites