THOUSANDS of households on Universal Credit are missing out on extra housing help worth £1,000s.
The little-known scheme known as Support for mortgage interest (SMI) was extended last year, making more people eligible.
1
It offers help with mortgage interest payments to those on Universal Credit and other benefits.
But if you’re on Universal Credit, SMI can help you pay the interest on up to £200,000 of your mortgage.
For those on pension credit, it’s up to £100,000.
The latest government figures show that 200,000 households receiving Universal Credit have mortgages.
Read more in money
But only 1.1%, or around 12,306, have applied for SMI, according to Policy in Practice.
Martyn James, consumer rights expert, said: “Sadly the scheme is still not exactly well known, and not well known at all amongst people who might need to apply for SMI the most.
“It’s frustrating because the scheme was opened up to those claiming Universal Credit for just three months or more in April last year – meaning a whopping 200,000 could get help if they want it.”
Before the change, it was available only to those who had been claiming Universal Credit for at least nine months.
Most read in Money
Deven Ghelani, director and founder, said: “Despite the change in policy to broaden eligibility criteria, there has been no increase to take up despite rising mortgage rates.
“SMI repayments are also likely to be much less than the actual amount of interest charged if the claimant is on a variable or tracker mortgage rate.
“It is vital that people know support is available and that those advising and supporting low-income households are aware of the changes in eligibility criteria and the availability of mortgage support.”
In its simplest terms, SMI is a loan given by the state to individuals on benefits that they can use to pay the interest charges on their mortgage.
The interest rate used to calculate the amount of SMI you’ll get is currently 3.16%.
For example, if you have £250,000 of your mortgage left to pay, and you’re eligible for SMI for up to £200,000, at the current SMI interest rate, you’ll get a loan of 3.16% of £200,000 across a year.
This is £6,320 a year or £526.66 a month.
But, as with everything in life, there are catches to SMI.
Martyn said: “First up, it’s not free money – it’s still a loan.
“So there’s interest to pay. But on a positive note, you’ll only pay it back when you sell or transfer your home ownership, and the interest charged is usually relatively low.”
The average mortgage interest rate is over 5%, but the current SMI repayment rate is just 4.5%.
But it’s important to know that the government can change the SMI repayment rate twice a year.
If you die before you’ve paid off your SMI loan, it will not need to be repaid if your home is left to a surviving partner.
But the loan must be repaid if your home is left to anyone else or it’s sold.
Of course, this option isn’t available to everyone, and others may choose to go to their lenders to get help first.
Even then, providers might not be aware or choose to signpost households towards SMI.
Others may have enough savings to cover mortgage payments for the short term, so they might opt not to apply for any extra support.
Martyn also said: “When I speak to people about SMI, they tell me that all the advice (including mine) is to ‘not borrow money to get out of debt’
“That’s certainly true. However, SMI is designed to help people who are struggling, so it’s not like other forms of lending for people who are out of cash.”
As a first port of call, we’d still recommend that you speak to your lender as soon as you think you will have a problem with your monthly repayments.
This way, they may be able to point you to support, which comes with less of a catch.
You’ll then be able to weigh up whether you think taking on SMI is worth the while.
What is SMI and who’s eligible?
Support for mortgage interest or SMI helps those on Universal Credit – and other benefits – by giving them a low-interest loan.
The help goes towards mortgage payments or loans taken out to help repair any damage to the home.
SMI is a loan that you will need to repay with interest when you sell your home.
You’ll get help paying the interest on up to £200,000 of your loan or mortgage.
But you’ll only get up to £100,000 if you get pension credit.
The interest added to the loan can go up or down, but the rate will not change more than twice yearly – the current rate is 4.5%.
To be eligible for a Support for Mortgage Interest (SMI) loan, you need to be getting one of the following qualifying benefits:
- Income support
- income-based jobseeker’s allowance (JSA)
- Income-related employment and support allowance (ESA)
- Universal Credit
- Pension credit
You can start getting the loan:
- From the date you start getting Pension Credit
- After you’ve claimed Income Support, income-based JSA or income-based ESA for 39 weeks in a row
- After you’ve got Universal Credit for 3 months in a row or you moved to Universal Credit within a month of another benefit ending and you’ve spent 3 months in total getting these benefits
How do I apply for SMI?
Contact the office that pays your benefit to find out if you could get an SMI loan.
If you get or have applied for income support, income-based JSA or income-related ESA, contact Jobcentre Plus.
You can do this by calling 0800 169 0310.
If you get or have applied for pension credit, contact the Pension Service by calling 0800 731 0469.
If you get or have applied for Universal Credit, you can either:
- Add a message to your journal on your Universal Credit account
- Contact the Universal Credit helpline on 0800 328 5644
What other mortgage help can I get?
As soon as you think you will have a problem with your monthly mortgage repayment – whether you can’t pay anything, can’t pay all of your monthly payments, or can’t pay it on time – get in touch with your lender immediately.
They have certain schemes in place to help you if you’re struggling.
Under the government’s Mortgage Charter, you can temporarily ask to switch your mortgage to interest-only, or extend your term to bring monthly payments down.
You won’t have to submit any further income details or share monthly spending commitments – you can just ask your lender to make the switch.
And it won’t affect your credit score for six months if you choose to take up the offer.
If anyone using the temporary measures decides to return to their original plan within six months, they are free to do so.
Ask your lender about the breathing space scheme if you find payments unaffordable.
Under the breathing space scheme, no debts will earn interest, and no fees will be added for 60 days.
You’ll be protected from debt collectors and bailiffs.
You may also be able to apply for a payment holiday – this is when you don’t need to pay anything.
However, interest and charges may continue to be added, and missed payments will need to be made in the future.
Every company has a different policy, so you’ll need to get in touch to find out what support is available to you.
Many local councils have Welfare Assistance schemes to help struggling families.
Help available varies, but you could get free cash, food vouchers, and help for bills like rent and energy.
Check with your council to see whether you are eligible and what you can claim.
And, of course, it’s always worth checking that you’re entitled to all the benefits available.
READ MORE SUN STORIES
Entitledto’s free calculator works out whether you qualify for various benefits, tax credits and Universal Credit.
Debt charity StepChange also has a benefits checker which is free to use and won’t record your results.
