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Support for Mortgage Interest Loan

Support for Mortgage Interest Loan is help towards paying the interest payments on your mortgage or other loans for home purchase, repairs and home improvements. This help is in the form of a loan.

1. What is Support for Mortgage Interest Loan?

Support for Mortgage Interest Loan is help towards paying the interest payments on your mortgage or other loans for home purchase, repairs and home improvements. This help is in the form of a loan.

If you are on Universal Credit you can also get a Support for Mortgage Interest Loan for help with interest payments on other loans that are secured on the home you occupy or treated as occupying (whatever the purpose of the loan).

If you are on Universal Credit or Guarantee Pension Credit, you can also get a Support for Mortgage Interest Loan to help with payments made under alternative finance arrangements (for example an Islamic mortgage) to help you acquire an interest in your home.

Before 6 April 2018, support for mortgage interest was paid in the form of a benefit.  However, now it is paid as a loan.  You have to pay interest on the amount of loan help provided.

You have to repay the loan when you sell or transfer ownership of the property, if there is enough equity in the property.

If you were receiving help in the form of benefit, that help will stop on 6 April 2018 and you will be offered a loan instead.  Accepting the loan is voluntary; so it is up to you whether you accept it or not.

 

Applies to: England, Scotland, Wales, Northern Ireland

Administered by: Department for Work and Pensions

Some of the rules and calculations described in this information sheet are very complicated so we recommend that you seek further advice on your particular situation. You can use the Find an Adviser tool on our website to find a local benefits adviser.

Updated: April 2018

2. Can I get Support for Mortgage Interest Loan?

Homeowners (or people treated as liable for owner-occupier payments) who are entitled to one of the following benefits could get Support for Mortgage Interest:

Owner-occupiers can also get help with leasehold service charges paid in with the above benefits.  Help with service charges is not in the form of a loan.  You can also receive help with ground rent paid in with Income Support, Income-based Jobseekers Allowance, Income-related Employment and Support Allowance and Pension Credit.

If you only qualify for contributory Jobseeker’s Allowance or contributory Employment and Support Allowance you will not be eligible for Support for Mortgage Interest loan.

You would have had to have served the relevant waiting period before you can get the Support for Mortgage Interest Loan.  This is normally 39 weeks for Income Support, Income-based Jobseekers Allowance, Income-related Employment and Support Allowance, and approximately nine months for Universal Credit.  There is no waiting period for Pension Credit.

The DWP will not do a credit check when offering you a loan; and taking the loan will not affect your credit rating.  However, interest will be applied daily to the loan, so you have to get as much information as possible before deciding whether or not a loan is the right option for you.

In most cases, people who rent their home cannot get help with housing costs in this way. Instead, they should claim Housing Benefit (England, Scotland and Wales) or Housing Benefit (Northern Ireland). or Universal Credit housing costs element if they are a Universal Credit claimant.

Updated May 2018

3. How much Support for Mortgage Interest Loan will I get?

It can be complicated to work out how much Support for Mortgage Interest Loan (SMI) you might get. You can use the Turn2us Benefits Calculator which will calculate how much you may be entitled to.

Housing costs for loans, whether that is a mortgage, home purchase loan or qualifying home improvement loan, are calculated using a standard rate of interest, not your lender’s actual interest rate for your loan. This means that if your interest rate is higher, there may be a shortfall between the help provided and your contractual payment.

The current standard interest rate used to calculate SMI is 2.61%.

There are also restrictions on the help provided if your mortgage or loan was taken out or increased after you became entitled to one of the means-tested benefits which qualify you for Support for Mortgage Interest Loan or if your housing costs are deemed excessive.

In most cases, there is also an upper limit on the total loan amount that can be included in your claim. The upper loan limit is usually £200,000 if you claimed Income Support, income-based Jobseeker's Allowance (JSA), income-related Employment and Support Allowance (ESA) or Universal Credit. For Guarantee Pension Credit, the upper limit is normally £100,000. However, if you were getting Income Support, Income-based Jobseeker's Allowance or Income-based Employment and Support Allowance with an upper limit of £200,000, and you went on to claim Pension Credit, the higher £200,000 upper limit continues to apply.

What if I have another adult living with me?

If you have other adults living with you who aren’t your partner and do not have to pay rent, they might be treated as your non-dependent. This means that an amount will be taken off your SMI loan because this other person is expected to help with household costs. This will only apply if you get an SMI loan because you get JSA, ESA, Income Support or Pension Credit. If you get an SMI loan because you receive Universal Credit you won’t have money deducted for non-dependents. 

You won’t have money taken off your SMI loan for a non-dependent if:

You also won’t have any money taken off your SMI loan for any other adult who:

If money is taken off your SMI loan for another adult, how much is taken off depends on the other adult’s earnings. It is important to make sure the Department for Work and Pensions (DWP) has accurate information about the other adult’s earnings so they can make the right decision about your SMI loan.

How will I be paid Support for Mortgage Interest Loan?

The payment is usually made direct to the lender. You can not get help towards the amount you borrowed - only the interest.

There are no time limits on how long you can receive the Support for Mortgage Interest Loan, providing you still meet the qualifying conditions.

Support for Mortgage Interest Loan run-on

If you or your partner enter full time employment, you might qualify for a Support for Mortgage Interest Loan run-on for four weeks, even though your entitlement to Income Support, income-based Jobseeker's Allowance or income-related Employment and Support Allowance will stop.

You don't have to make a claim, it will be paid automatically once you let Jobcentre Plus know you are starting full time work.

Updated: September 2019

4. How do I claim Support for Mortgage Interest Loan?

When you claim Income Support, Income-based Jobseeker's Allowance, Income-related Employment and Support Allowance , Guarantee Pension Credit, or Universal Credit you would have told the Department for Work and Pensions (DWP) that you are an owner-occupier with a mortgage or treated as if this is the case. (If you were getting the Support for Mortgage Interest (SMI) benefit before 6 April, the DWP should have notified you already that these payments will stop).

The DWP will send you a letter and an information booklet explaining how the Support for Mortgage Interest Loan will work.

You will then receive a phone call from a company called Serco, who work on behalf of the DWP, where you will receive further information such as the terms and conditions of the loan.

If you are a member of a couple, both you and any partner living with you, must receive the phone call in order to be offered the loan.  This is so that both of you understand the terms of the loan.  You can arrange the call at a time that is convenient to you, and you can have someone present with you during the call, such as a friend, relative or carer.

If you want to accept the Support for Mortgage Interest Loan, you can do so during the phone call or by contacting the DWP afterwards.  Papers will be sent to you and your partner (if you have one) to sign and return.  If you sign and send it back the DWP they will write back to you to confirm that they have received your signed agreement.

You will also get a letter confirming when your Support for Mortgage Interest Loans will start.  Your Support for Mortgage Interest Loan payments will normally go straight to your mortgage lender.


I don't want the loan, what do I do?

You don't have to accept the loan if you don't want to.

However, it is important to come to some arrangement to pay your future mortgage or secured loan payments. If you do not do this, payments to your mortgage will stop and you may begin to run up arrears  This could mean that your mortgage lender could eventually take court action to evict you from your home.

If you require help and support on this you could try contacting the following organisations – Money Advice Service; Citizens Advice if you live in England or Wales; Citizens Advice Scotland for Scotland and Citizens Advice Northern Ireland for Northern Ireland. 

You can also use our Find-an-adviser tool, to find out what advice exists in your area.

Change of circumstances

You must report changes in your circumstances which might affect your entitlement to the loan.

Updated: April 2018

5. How and when do I pay back the Support for Mortgage Interest Loan?


You have to pay back the loan and the interest added to it, when you sell or transfer ownership of your property providing there is enough equity left.  A charging order is placed on your property so that you have to pay it back when you sell it.

Interest is charged on the loan, which is added to the loan you have to pay back.  Interest is charged based on the Government’s rate of borrowing and that can vary (go up or down) during the life of your loan.

If you stop receiving the loan, because you are no longer on a relevant benefit, or you choose to stop the loan, interest will still be charged at a daily rate.


What happens if there is no money left when I sell my home?


If there is no equity available when the property is sold or ownership transferred, the loan is written off.  If there is some money available from the sale to pay towards the loan, but not enough to pay off the whole of the loan, then the money available goes towards paying off the loan and the rest of the loan is written off.  

If you are in mortgage arrears then money from the sale will first go towards paying off the mortgage arrears, and only if there is money available after the payment of mortgage arrears, will it go towards the loan.


What happens if I don’t sell or transfer my home?


If you don’t sell or transfer ownership of your property, then you do not have to pay back the loan.  However, if someone inherits the property from you, they will be liable to pay off the loan and accrued interest.

If your partner inherits the property from you they will only be liable to pay off the loan and accrued interest if they sell or transfer ownership of the property.  

If anyone else inherits the property from you (e.g. an adult son or daughter or other non-dependent), they will become liable to pay back the loan and the interest at the point that:

  • You die, if you are single.
  • The last surviving partner has passed away, if you are in a couple.


Can I pay back the loan before my home is sold?


You don’t have to make repayments of the loan unless you want to. 

However, if you wish, you can make payments off the loan if your situation improves.  (The minimum payment you can make is £100, unless the total owed is less than that). However interest continues to be charged on the loan until it is paid off in full.

If you stop receiving the loan, because you are no longer on a relevant benefit, or you choose to stop the loan, interest will still be charged at a daily rate.


Can I decide to stop receiving the loan?


You can decide to stop receiving the loan at any point.  However, interest continues to be charged at a daily rate until it is paid off in full.


Is taking out a loan my best option?


We can’t advise you on what you should do.  You will be charged interest on the Support for Mortgage interest loan and  a charge will be placed on your property.  You should, therefore get as much advice and information as possible and carefully consider your options.

No one will be able to predict how high interest rates will rise or fall; and how well the housing market will perform.   If you are considering selling your property in the future then the loan and interest will eat into any return you will get from it.

If you require help and support on this you could try contacting the following organisations – Money Advice Service; Citizens Advice if you live in England or Wales; Citizens Advice Scotland for Scotland and Citizens Advice Northern Ireland for Northern Ireland. 

You can also use our Find an Adviser tool, to find out what advice exists in your area.

May 2018

6. How do I challenge a Support for Mortgage Interest Loan decision?

If you have been refused a loan or disagree with the amount awarded, you can challenge the decision in the same way that you would normally challenge a benefits decision.  This means asking for a mandatory reconsideration first, before appealing.

Updated: April 2018