The government offers Support for Mortgage Interest (SMI), a loan intended to assist in making interest payments on your mortgage or home improvement loan. This article explains how SMI works, who is eligible, and how to repay the loan, as well as providing alternative options for mortgage assistance.
If you qualify for SMI, you can borrow up to £200,000 to pay your mortgage interest. However, the loan amount is capped based on a calculation of how much interest is due. You cannot use the loan to repay the amount you borrowed, any missed repayments, or for insurance policies. The loan must only be used to pay the interest on your mortgage or home improvement loan.
You become eligible for an SMI loan if you apply for a qualifying benefit. If you already receive a qualifying benefit or have previously declined an SMI loan, you may still be eligible by contacting the office that pays your benefits. SMI loans are typically offered to individuals who receive Income Support, Jobseeker’s Allowance, Employment and Support Allowance, Universal Credit, or Pension Credit. However, you cannot currently receive statutory sick pay, statutory maternity/paternity/shared parental/adoption pay, or income from employment or self-employment.
The loan does not have to be repaid until you sell your home or transfer ownership to someone else. At that time, any proceeds must first be used to pay off the mortgage and any other loans secured on the property. After that, any remaining money is used to repay the SMI loan with interest. If there is no money left over or only enough to partially repay the loan, the remaining debt is written off.
Unfortunately, many people who require assistance with mortgage repayments are not eligible for SMI. However, there are alternative options available. Some lenders may allow you to pause or reduce mortgage repayments for an agreed period through a mortgage payment holiday, particularly if you have overpaid your mortgage in the past. You could also shop around for a better rate to reduce repayments or remortgage to extend your mortgage term. A debt consolidation mortgage can group your mortgage repayments and other debts together as one monthly payment. Additionally, switching from a capital repayment mortgage to an interest-only mortgage can significantly reduce the amount you need to repay each month. It’s recommended that you talk through these options with an expert, such as a mortgage broker, to determine the best choice for your situation.