If you are struggling to pay your mortgage and receive certain benefits, you may be able to get help with your interest costs through Support for Mortgage Interest (SMI).
There are over 22,000 UK households currently getting Support for Mortgage Interest payments from the government, according to the Office for National Statistics. Here, we explain what Support for Mortgage Interest is, who is eligible, how much you can expect to get, and how to apply for it.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
Contents
- What is Support for Mortgage Interest?
- Who is eligible for Support for Mortgage Interest payments?
- How much will you get and for how long?
- How much interest will you pay on a Support for Mortgage Interest loan work?
- How do you pay off a Support for Mortgage Interest loan?
- How to apply for a Support for Mortgage Interest loan
What is Support for Mortgage Interest?
Support for Mortgage Interest is effectively a loan that people on certain benefits can get to help them pay the interest on their mortgage if they are struggling to stay on top of it. SMI is also available on any loans that people have taken out to make repairs or home improvements.
The loan can only be used to pay the interest you owe on your mortgage, and not the mortgage capital you’ve borrowed. While you will still need to pay for the mortgage itself, if you are in real difficulties, SMI could help reduce your monthly costs considerably.
Before 2018, SMI was paid as a benefit, but since then, SMI has been offered as a loan. When you sell or transfer ownership (to your children for example), you will need to repay the loan, along with the interest that’s built up over time.
Who is eligible for Support for Mortgage Interest?
To be eligible for SMI, you need to be a homeowner or in a shared ownership scheme and you must be receiving one of the following benefits:
- Income Support
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Universal Credit
- Pension Credit
There are some limitations to getting SMI, and if you have or receive any of the following you might not qualify for help from this scheme:
- Earnings from your job if you’re employed or self-employed
- A tax refund
- Statutory Sick Pay
- Statutory Maternity Pay
- Statutory Paternity Pay
- Statutory Adoption Pay
- Statutory Shared Parental Pay
If you’ve been getting any of these seven benefits, you will need to stop receiving them and claim one of the benefits listed above them for nine months consecutively before you will be able to apply for SMI. The one exception to this rule is if you receive Pension Credit, in which case you can start claiming SMI immediately, rather than waiting for nine months.
How much will you get and for how long?
If you are eligible for Support for Mortgage Interest, it will cover the interest you owe on the first £200,000 of your mortgage (£100,000 if you receive Pension Credit) at a set interest rate of 2.09%, so even if the mortgage interest rate you are paying is above this, you will only receive the 2.09%.
It can be complicated to work out exactly how much you might get, but you can use a range of benefits calculators which can help you understand exactly how much you may be entitled to:
There isn’t necessarily a time limit on how long you will get your SMI loan for, but it will only be paid for as long as you have a mortgage which you are actively paying off.
How do you pay off the Support for Mortgage Interest loan work?
Your SMI loan will be paid directly to your mortgage lender and like most loans, there will be interest applied to the amount you borrow. The current interest rate is 0.6% and is calculated on your loan daily. It’s important to understand that this interest rate can fluctuate, but the rate will not change more than twice a year.
To give you an idea of how interest builds up, if you were to receive £30 each week towards the interest on your mortgage, the amount you would receive in a year is £1,560 (£30 x 52 weeks). This, plus the interest you’re charged (currently 0.6%), is the amount of your SMI loan. So assuming this rate stays consistent throughout the time you have your SMI loan, the amount you owe could accumulate like this:
| Yearly | Outstanding loan | Annual SMI loan payments | Outstanding loan before interest | Interest (%) | Interest (£) | Balance owed (payment + interest) | Cumulative interest |
| Year 1 | £0.00 | £1,560.00 | £1,560.00 | 0.6% | £9.36 | £1,569.36 | £9.36 |
| Year 2 | £1,569.36 | £1,560.00 | £3,129.36 | 0.6% | £18.78 | £3,148.14 | £28.14 |
| Year 3 | £3,148.14 | £1,560.00 | £4,708.14 | 0.6% | £28.25 | £4,736.38 | £56.38 |
| Year 4 | £4,736.38 | £1,560.00 | £6,296.38 | 0.6% | £37.78 | £6,334.16 | £94.16 |
| Year 5 | £6,334.16 | £1,560.00 | £7,894.16 | 0.6% | £47.36 | £7,941.53 | £141.53 |
| Year 10 | £14,468.01 | £1,560.00 | £16,028.01 | 0.6% | £96.17 | £16,124.18 | £524.18 |
| Year 15 | £22,848.82 | £1,560.00 | £24,408.82 | 0.6% | £146.45 | £24,555.27 | £1,155.27 |
It’s worth noting that much like any loan, you will continue to be charged interest until the loan is fully repaid, even if you stop receiving SMI payments.
Do you have to repay your Support for Mortgage Interest loan?
Yes, you do have to repay your SMI loan, but only when you sell your property or if you transfer ownership to someone else.
When you sell your property, you will pay off your mortgage and any other secured loans and it is at this point the Department for Work and Pensions will take your SMI loan repayment. Only people who have equity in their home will need to repay, so if house prices have fallen and there isn’t enough money to pay off your SMI loan in full after you have paid your mortgage and other debts, the DWP will cancel the rest of the debt.
If you transferred ownership of your home to someone else, the DWP will look at how much you would have got from selling your house on the property market and then determine how much of your SMI Loan you would have been able to pay back after paying your mortgage.
You don’t have to wait to sell your house to repay your SMI loan, and if you have the money to do so, you can voluntarily repay it. The minimum you can repay at any time is £100 or the outstanding balance if it’s less than £100. Remember that you will continue to be charged interest until your loan is fully paid off.
To start making repayments, you will need to contact the DWP Loan Repayment department and request a ‘settlement letter’, which will tell you how much you need to pay to clear your loan. You will then be able to pay over the phone, or via online banking. You can contact the DWP Loan Repayment department on 0800 916 0567 or on Relay UK (if you cannot hear or speak on the phone): 18001 then 0800 916 0567.
How to apply for a Support for Mortgage Interest loan
When you apply for one of the qualifying benefits listed above, you will usually be asked further questions about your housing costs to determine whether you can get a Support for Mortgage Interest loan. You might also be sent a form asking for more detailed information. If you are eligible, you will be offered an SMI loan which you can either accept at that time or later on if you are still eligible. If you don’t take the loan immediately, you still might be able to get your SMI loan backdated to when you were first entitled to it.
If you didn’t go through this process initially, if you turned down the SMI offer, or if your circumstances have changed and you think you might be eligible for an SMI loan, then it’s best to contact the office that manages your qualifying benefit and ask them to send you an SMI loan application form:
- Income Support, income-based JSA or income-related ESA, contact Jobcentre Plus.
- Phone: 0800 169 0310
- Relay UK (if you cannot hear or speak on the phone): 18001 then 0800 169 0310
- Welsh language: 0800 328 1744
- Pension Credit, contact the Pension Service.
- Phone: 0800 731 0469
- Relay UK (if you cannot hear or speak on the phone): 18001 then 0800 731 0469
- Welsh language: 0800 731 0453
- Universal Credit, contact the Universal Credit helpline.
- Phone: 0800 328 5644
- Relay UK (if you cannot hear or speak on the phone): 18001 then 0800 328 5644
- Welsh language: 0800 328 1744
If the office that provides your benefit agrees that you are eligible, they will send you the application form to fill out.
Once you have the application form, you will need to fill it out and send it to your mortgage lender, who will process it and send it on to the DWP.
Once the DWP has your application, they will review it and let you know if you can get SMI. They should get back to you within four weeks, but get in touch with them if you haven’t heard anything from them after this. If you are eligible, they will call to check if you still want it and will explain how it all works. You can ask any questions you might have on this call as well. After this, they will send you two documents: the loan agreement and a charge form which will allow the DWP to take the money to pay back the loan when you sell your home. Once you’ve signed these and sent them back to the DWP they will start making the loan payments.
Can anyone help with the application process?
As with any financial commitment, it is really important to make sure you fully understand what you are signing yourself up to. So if you need any help or advice during the process of applying for SMI, you can contact your local Citizens Advice who may be able to offer you some guidance. They will not be able to tell you what to do, but they might be able to answer some of your questions and help you understand the process.
Rest Less Money is on Instagram. Check out our account and give us a follow @rest_less_uk_money for all the latest Money News, updated daily.