If you’re on certain benefits and you’re struggling to pay your mortgage, you might be able to get help from the government to pay the interest on your mortgage. This is called Support for Mortgage Interest (SMI).
What is Support for Mortgage Interest
You will be able to continue claiming SMI as a benefit for a limited time if you need someone to make financial decisions for you, due to a health condition or disability.
Support for Mortgage Interest (SMI) will be paid as a loan - which must be repaid when you die, sell your home or transfer ownership of the property. SMI used to be paid as a benefit, which you didn’t have to repay.
Can I get SMI?
To get Support for Mortgage Interest, you must be out of work or of State Pension age, and get:
- Income Support
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Universal Credit, or
- Pension Credit.
There is a 39-week waiting period from the time you claim SMI until your first payment is made (unless you’re getting Pension Credit, in which case you can get help immediately). If you’re on Universal Credit, this waiting period is nine assessment periods (equivalent to nine consecutive months).
If you’re receiving an eligible legacy benefit you can work up to 16 hours a week before losing your entitlement to SMI. However, if you’re on Universal Credit and have any ‘earned income’ you will not qualify for SMI and you will have to restart your waiting period.
If you’re not a homeowner but you rent your home, then you cannot get SMI. However, you might be entitled to Housing Benefit or the Housing Costs element of Universal Credit. Find out more in our guide.
What you’ll get
The government will pay the interest on up to £200,000 of your mortgage (or up to £100,000 if you’re getting Pension Credit).
The government will use a standard interest rate to calculate the amount they will pay. This might mean it is different to the actual interest rate on your mortgage. The government interest rate is variable so it might go up or down over time.
The payments will normally be made directly to your mortgage lender.
There is no help available to help repay the capital (the amount you originally borrowed) of your mortgage.
What might affect how much SMI I’ll get?
If you have adults living with you who do not pay rent, (this excludes your partner but might include grown-up children) then it may reduce how big your SMI loan can be.
Benefits charity Turn2Us has a free calculator you can use to work out how much SMI you might be entitled to if you live with any other adults.
Key facts about the SMI loan
- there are no fees to set up the loan
- you don’t have to get a credit check to get the loan and taking it will not normally affect your credit rating
- unlike a normal loan, you don’t have to make regular repayments - unless you want to
- interest will be added to the total amount you owe, until the loan is paid back or written off
- you will not get a loan automatically - you have to choose to take one out
- the SMI payment is usually made directly to your mortgage lender
- the loan is secured against your home. When you sell your home or transfer the ownership of it to someone else, you must pay back the loan out of any equity left over once your mortgage is repaid.
SMI for home improvement loans
You can also get SMI to help pay the interest of a loan you’ve taken out to cover:
- essential repairs or improvements to your home – such as insulation, repairing dangerous faults or adapting your home if someone in your household is ill or disabled
- buying your ex-partner’s share in your home if you have separated.
How long can you get SMI for?
There’s no limit to how long you can claim SMI for.
Can I backdate my SMI claim?
Even if you have previously declined an SMI loan, your claim can be backdated to the date you first became eligible.
If this date is before 6 April 2018, when SMI changed from being a benefit to a loan, then your claim will be backdated to 6 April 2018.
If you’ve been getting SMI as a benefit
On 6 April 2018, SMI changed from being a benefit to becoming a loan. If you were claiming SMI before April 2018, you will not have to repay anything you‘ve already received as a benefit.
Transferring an SMI loan
If you’re getting an SMI loan and you want to move home, or the ownership of your property is transferred, you will need to repay the SMI loan with interest.
There are plans to allow you to transfer an SMI loan to a new property. This should come into force in early 2021.
How is interest charged to your SMI loan?
The help you get to cover the cost of interest on your mortgage repayments is based on a Standard Interest Rate. This is currently 2.61% and can be subject to change, but you will be told if this happens. The following example assumes no change in this rate.
Because the help you have received is now a loan you will be charged interest. The longer you receive help, the more interest you will be charged. This is calculated daily and can change. However it cannot change more than twice in any year.
Let’s say you receive £22 each week towards the interest on your mortgage. The total help you will have received in a year is £1,144 (£22 x 52 weeks). This, plus the interest you’re charged (currently 1.3%), is the amount of your SMI loan.
How much will an SMI loan cost?
||Outstanding loan at beginning of year
||SMI loan payments made during the year
||Outstanding loan owed at year end before interest
||Interest charged on loan
||Amount of interest added that year
||Balance owed at the end of the year (Payments plus interest)
||Cumulative interest charged on your SMI loan owed
Repaying an SMI loan
Interest will be added to the SMI loan each month at a rate set by the government (which may go up or down). The interest charged is ‘compound’, this means each month’s interest will be included in the total ‘balance’ to calculate the next month’s interest.
You can choose to pay back the loan at any time - for example, if you find paid work and can afford to make repayments. Normally, the minimum amount you can repay each time is £100.
The loan will usually have to be repaid when you die, sell your home or transfer ownership.
You will also have to repay the loan if you move home and cannot transfer the loan to the new property.
If you die and your house passes to your spouse or civil partner, the loan can be paid back when they die instead.
The DWP will take back the amount of loan you owe from the money your heirs get from the sale of your home.
What happens if I sell my home?
When your home is sold, if there is not enough money left over after your mortgage is repaid to pay back the SMI loan, the remaining amount will be written off and DWP will consider the loan to be fully repaid.
Can my mortgage lender help me instead of getting an SMI loan?
If you are having problems with making your mortgage repayments, you should contact your lender to find out what support they can offer, which could include a short payment ‘holiday’ or deferral to help you get over a temporary crisis or an extension of the term of your mortgage.
You could also look into options you might have to switch mortgages to get a better interest rate.
Using your savings to repay the SMI loan
How much you have in savings will affect the benefits you’re getting to be eligible for SMI. So, you must have less than £16,000 in savings or investments (or £10,000 if you’re getting Pension Credit).
If you have between £6,000 and £16,000 in savings or investments (or between £6,000 and 10,000 if you’re getting Pension Credit), the amount of benefit you’re getting now might be reduced.
If you use any savings to pay off your SMI loan, the amount you get in benefits might increase - if your savings fall below £6,000.
Asking friends or family for help to repay the SMI loan
If you have family members or friends who have their own income, you might want to ask them to lend you the money to pay back your SMI loan.
This could be a good option if the person you’ve borrowed the money from doesn’t charge you any interest.
But you should always think carefully before you borrow from family or friends and be sure you can pay back what you’ve borrowed within an agreed timeframe. If you can’t, it could affect the relationship you have with that person.
Read our guide ‘Should you borrow from family and friends?’
Asking a credit union, bank or building society for a loan
You could ask a credit union, bank or building society for a loan, which you could use to pay back your SMI loan.
A credit union, bank or building society loan will not be secured against your home, so your home is not at risk if you can’t keep up with repayments.
Bear in mind, you would need to have a credit check, and that a loan from a credit union, bank or building society is likely to have a higher rate of interest than the SMI loan.
We can also help you think your options through in our ‘Before you borrow’ section.
Moving to a different property
You could sell your home and buy a cheaper house, which would mean you could have a smaller mortgage - or you might not need to have a mortgage at all.
Remember to factor in the other costs of moving house - like Stamp Duty and removal costs, for example.
Should I get an SMI loan?
Before you decide whether an SMI loan is the best option for you and your household, it’s a good idea to seek professional advice.
Call us on 0800 138 7777 for free, impartial money advice. Lines are open Monday to Friday, 8am to 6pm and Saturday, 8am to 3pm (webchat only). Calls are free.
You can also get housing advice from these organisations:
How to claim SMI