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Government help with mortgage payments. How does it work?

If you’re struggling to pay your mortgage the government can help you meet your mortgage interest payments if you’re on a low income.

Support for Mortgage Interest (SMI) payments

SMI can help with the cost of mortgage interest payments. From April 2018 onwards, SMI is in the form of a loan secured against your property.

To be eligible for SMI you need to be receiving one of the following benefits:

  • Income support
  • Income-based jobseekers allowance (JSA)
  • Income-related employment and support allowance (ESA)
  • Pension credit

If you're getting universal credit, the housing element for homeowners works in the way as SMI.

SMI is paid directly to your mortgage lender. The payments will start 39 weeks after you've claimed. This means if you don’t have enough money to pay the first 39 weeks, you’ll build up mortgage arrears which will need to be repaid later.

If you're claiming Pension Credit the SMI payments will start straight away

SMI will only pay the interest on your mortgage, not the capital. Ask your mortgage lender to change your mortgage to interest-only for the period you’re on SMI.

You can find out more on how the SMI scheme works from Gov.uk.

SMI loans have replaced benefits: Important information for people receiving this support

All existing support for mortgage interest benefit claims finished on 5 April 2018. Anyone currently receiving SMI benefit has been offered an optional SMI loan instead.

People receiving SMI benefit have been notified by the Department for Work and Pensions (DWP) that this benefit was due to end in April 2018, being replaced by the loan scheme.

These loans will not be automatically awarded. In order to qualify, you must sign an agreement. If you don’t sign up, the payments to your mortgage lender will automatically cease.

If you have any queries about the new SMI loan agreement, contact Serco on 0800 046 8333.

How can the SMI loan affect my debt repayments?

If you are on a debt management or token payment plan, SMI being paid as a loan, rather than as a benefit, will not affect your plan.

If you have an IVA or Trust Deed, we recommend you discuss this with your IVA provider or insolvency practitioner.

If you are planning on going bankrupt, the SMI loan is regarded as a secured debt. It will become repayable as soon as your bankruptcy order is made. If the trustee sells the property, they would repay the balance to the DWP from the proceeds of the sale.

If you sign the SMI loan agreement:

  • The SMI payments to your mortgage lender will continue at the same rate as before
  • Payments from 6 April 2018 onwards are in the form of a loan from the Department for Work and Pensions which will be secured against your property
  • The loan amount secured against your home will increase each month, and this will reduce your equity
  • You don’t have to repay any of the loan until you sell the house or you die
  • If there isn’t enough equity to repay the full loan when the house is sold or when you die, anything else will be written off
  • The interest rate charged on the loan is lower than commercial secured lending and the way the law states the rate is calculated means it will stay low in the future

If you don’t sign the SMI loan agreement:

  • The SMI payments going to your mortgage lender stopped on 5 April 2018
  • Your mortgage lender is likely to contact you when they realise the payment have stopped
  • Unless you can pay the monthly mortgage interest from another source, your lender is likely to start court action to repossess your home
  • If your lender takes you to court, refusal to sign the SMI loan agreement is likely to be seen as making your situation worse. This makes it more likely that the court will grant possession to your lender

Free help and advice

To find out if you could qualify for this scheme and for help with applying, please call our Helpline (free from all landlines and mobiles). One of our expert advisors will be able to give you specialist advice and answer any questions you may have.

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