Help with mortgage interest payments: a comprehensive guide
If you are a homeowner claiming benefits, you may be able to get government help with your mortgage. This help is a loan called Support for Mortgage Interest (SMI).
Table Of Contents
What is Support for Mortgage Interest (SMI)?
Support for Mortgage Interest (SMI) is a UK government loan to help pay your mortgage interest. A mortgage loan is made up of two parts which include:
- The capital – or loan: this part of the mortgage is the original amount borrowed
- Interest – sometimes including fees: the amount the bank charges on top of the capital
SMI only pays the interest part of your mortgage. You do not need to pass a credit check to apply for SMI and it will not normally affect your credit rating.
How do I get Support for Mortgage Interest (SMI)?
You can apply for SMI if you claim (or start claiming) the following benefits. These benefits are also known as qualifying benefits.
They include:
- Universal Credit
- Pension Credit
- Jobseeker’s Allowance (income-based)
- Employment and Support Allowance (income-related)
- Income Support (this is being phased out by the end of 2024/25)
What can I use SMI for?
What SMI can be used for |
What SMI cannot be used for |
|---|---|
Paying mortgage interest |
Paying any home insurance policies |
Repaying an existing mortgage or loan if you are on qualifying benefits |
Missed mortgage payments – mortgage arrears |
Paying loan interest – if the loan was taken out for:
|
Paying an increase to an existing loan or mortgage |
If you are buying a home to:
|
How much SMI will you get?
SMI will help pay interest on up to £200,000 of your mortgage or secured loan.
- If you are on Pension Credit, It will help pay interest on a mortgage of up to £100,000
- If you are getting SMI and later start claiming Pension Credit, you may still get help with interest on up to £200,000 of your mortgage
- You may get more if you had to take out a secured loan to make adaptations to your home to help with disability or illness
- You will get a lower SMI loan if other adults live in your home but do not pay rent or help with the mortgage. This might include dependent adult children
How does SMI work?
SMI uses a standard interest rate. This may not be the rate you are paying for your mortgage. The interest rate used to calculate SMI payments changes. The amount of SMI you will get is calculated using one standard interest rate – currently 3.16%.
This means if you have £150,000 left of your mortgage to pay, you will get an SMI loan worth 3.16% of £150,000. This works out at £4,740 a year, which is split into £395 a month.
Will an SMI loan cover all my interest payments?
The interest rate you pay on your mortgage may be higher than 3.16%. If this is the case, your loan will only pay some of the mortgage’s interest. If you have a fixed deal on a lower rate, then you will get more SMI than you are paying in interest.
How do I pay back SMI?
SMI is a loan so you will have to pay it back along with interest. The rate you pay back SMI also changes - it is currently set at 3.9%. You can choose to wait to pay back the loan when you sell your home or you can pay it back sooner by making ad hoc voluntary repayments.
SMI – what you will pay and when
The interest charged on SMI loans can go up or down, but it will never change more than twice in one year.
- If you die, your SMI will not need to be repaid if your partner or spouse has been left your home
- If you sell your home, you can transfer your SMI loan to the new property
- If you sell your home, your mortgage and any secured loans will need to be paid off first
SMI – is my home at risk?
You will not be made to sell your home to repay your SMI loan. If you do not have enough left to pay the SMI loan when you sell your home, any outstanding amount of SMI will be written off.
Case study one:
- You sell your property for £150,000
- You have £50,000 of your mortgage left to pay and you owe £5,000 on SMI loan
- You will have £95,500 after repaying your mortgage and SMI loan
Case study two:
- You sell your property for £100,000
- You have £95,000 left to pay on your mortgage and owe £10,000 for your SMI loan
- After repaying your mortgage you will only have enough money to pay back £5,000 of your SMI loan. The remaining £5,000 will be written off
How SMI is paid
SMI is usually paid direct to your lender. If you no longer need SMI, you can end your loan by contacting the benefit office that arranged it.
How to apply for SMI
- When you start claiming a benefit, you will be asked if you need help with housing costs.
- If you need help, you will be given a form to apply for SMI.
- When you fill in the form, you will need to know:
- How much is outstanding on any mortgage or home improvement loans
- The amount of interest you are paying on your mortgage or loans
- If you have a partner, you both need to sign the form.
- When you have filled in the form, send it to lender.
- Your lender will fill in the form and send it back to the benefit office.
- Your application for SMI will either be approved or declined.
- If you are accepted for SMI, you don’t need to take the loan then, you can choose to accept it another time.
- If you accept your SMI, loan payments will be backdated up to when you were first entitled to the loan.
When will I get paid my SMI?
SMI can take months to arrange, so if you are likely to miss an immediate mortgage repayment, you will need to contact your lender as soon as possible.
When you can apply for SMI will also depend on what benefits you are claiming.
Benefit |
When you can apply for SMI |
|---|---|
Pension Credit |
As soon as you start claiming |
Universal Credit |
After three months of consecutive payments |
Income Support, Jobseeker’s Allowance or Employment and Support Allowance |
You will need to have been claiming for 39 weeks |
Frequently asked Questions: Support for Mortgage Interest
Is an SMI loan a good idea?
Pros of SMI |
Cons of SMI |
|---|---|
It can help make your mortgage or loan repayments more affordable |
You will pay more interest, so you will end up paying back more than you borrow |
It reduces how much you need to pay your lender each month – freeing up money to clear other debts |
The longer you keep the loan, the more interest you will pay even if monthly payments seem cheaper |
You can repay it at a later date |
Other help may be a better and cheaper option |
What other help can I get with my mortgage?
An SMI loan may help ease financial pressure on your monthly bills, but there may be other options such as:
- Help from your mortgage lender – they may offer a payment holiday or switch you to an interest-only mortgage
- Remortgaging – you could move to a cheaper home loan, which could reduce your monthly interest payments
- Extending your mortgage term – although you will pay more interest over a longer period
- Using savings – you may be able to reduce your mortgage by paying it off with savings. Depleting your savings may also mean you are eligible for other benefits
- Taking out a short-term loan from a credit union, bank or building society – although you will pay more interest
- Downsizing by moving to a cheaper or smaller home – this will reduce your mortgage but you will have up-front moving costs to consider first
Use the MoneyHelper benefits calculator to see what other payments you may get.
What happens if I am refused an SMI loan?
You may be able to appeal a benefits decision. To start with you need to ask for a Mandatory Reconsideration.
Summary: Support for Mortgage Interest (SMI)
SMI does not pay the capital part of your mortgage – it only covers the interest part. You get SMI if you are on certain benefits. SMI is a loan that you must pay back with interest. You can pay it back in instalments or when you sell your home. But you can choose to defer paying back your SMI if you move to another property.