To be eligible for the Universal Credit state benefit, you must be out of work or have a low income. If you own a home or have shared ownership, and you need extra financial support to help pay for your mortgage, then you can try claiming mortgage support under Universal Credit. The guide explains how.
Universal Credit and SMI
Universal Credit is replacing Housing Benefit. For both Housing Benefit and the housing element of Universal Credit, this money goes towards rent and not a mortgage. If you are claiming Universal Credit and have a mortgage, it is possible to get help with paying the interest on it. Previously, Support for Mortgage Interest was a benefit itself. Now, this has become a loan, which means that you will eventually have to pay it back. SMI is available when a Universal Credit claimant who is out of work earns no income but needs to pay interest to their mortgage lender. In couples, both must be out of work.
What is Support for Mortgage Interest?
SMI is financial support from the state towards your mortgage. You cannot claim SMI for the first 39 weeks of receiving a benefit (unless it is Pension Credit). If you claim SMI, the government will pay the money directly to the mortgage lender and not the claimant. SMI only covers the interest on your mortgage and not the actual capital. It covers interest on the first £100,000 of a mortgage if you are claiming Pension Credit but covers up to £200,000 if you claim a disability or unemployment benefit. While this used to be an actual benefit, from April 2018 claimants will be liable for repaying any SMI payments. They will calculate the amount of money you receive by applying a set interest rate to your outstanding mortgage balance. You must repay it plus interest upon selling or transferring ownership of your home. SMI will not pay for mortgage arrears or insurance policies, only mortgage interest.
Who can claim SMI?
You could be eligible to receive Support for Mortgage Interest if you have been receiving one of these qualifying benefits for 39 consecutive weeks:
- Income-related Employment and Support Allowance
- Income-based Jobseeker’s Allowance
- Income Support
- Universal Credit (no earnings)
You must be liable for paying the interest on a mortgage or an eligible home improvement loan. If you are on Pension Credit, then you can start getting SMI without having to wait for 9 months, but it will be for a lower amount.
How to Claim an SMI Loan
You can claim SMI at your local Jobcentre or Pension Service office. If you are applying for Universal Credit, then you can apply for an SMI loan under the “housing costs” part of the claim. You can claim for support towards paying the interest on home improvement loans or buying an ex-partner’s share in your property. If you have joint ownership of a property, both joint owners need to agree to the SMI loan. If your mortgage has a higher interest rate than the SMI rate, the SMI loan will not be enough. You will still have to pay off the rest of the amount yourself. However, if your mortgage interest rate is lower than the SMI rate, then you could pay off some of the capital. Once SMI payments begin, they will go directly to your lender at the end of every 4 weeks. You will stop being eligible for SMI when you start earning an income again, but you could get run-on payments for the next 4 weeks.
Repaying an SMI Loan
The SMI loan is secured against your home, like a mortgage. If you do not pay the loan back earlier, then it becomes immediately repayable upon you selling the house or dying. At this point, they will write off the outstanding balance if it is more than the property’s remaining equity. Interest on your loan will keep building over time unless you start to pay it off. You can make minimum repayments of £100 a month at any time. The interest rate is not fixed and will keep in line with the average mortgage rate. You will have to pay back the SMI loan plus interest, but it is generally cheaper than a loan from a bank and avoids the stress of mortgage arrears. You can ask to stop receiving SMI loan payments at any time as well, and ask for a settlement letter from the DWP if you want to know how much you still need to pay.