What is SMI?
Support for Mortgage Interest is a Government benefit initiative aimed at homeowners who are struggling to pay a mortgage because they have fallen upon hard times and are claiming one of the following benefits:
- JSA (Job Seeker’s Allowance)
- ESA (Employment & Support Allowance)
- Income Support
- Universal Credit
- Pension Credit.
How is it changing?
From 5 April 2018, SMI becomes a secured repayable loan, similar to a second mortgage. If you are in receipt of SMI, you will able to repay the full amount, or part of, the loan at any time, with a minimum repayment of £100 or the loan will be repayable when your house is sold or transferred to someone else, or on death. However, if there isn’t enough equity, the remaining balance will be written off, so this won’t become a problem for your children.
There is no monthly payment.
What does SMI do?
SMI is normally paid direct to your mortgage lender to assist with the interest payments only.
What does SMI not do?
SMI does not help towards the amount you borrowed or assist with mortgage arrears.
How is SMI calculated?
If you qualify for SMI, you’ll receive help in paying the interest on up to £200,000 of your loan or mortgage. The standard interest rate used to calculate SMI is 2.61%.
Why is SMI changing?
Official statements from Government are a move towards making the system fairer for taxpayers (who ultimately provide the SMI safety net) and, by converting the existing free benefit to a loan, Government feel any increase in the future property price will deliver an equity uplift payment as a reasonable return.
How do I claim?
If you are currently getting SMI, you should have received a letter and information leaflet explaining the “offer” of a loan. You don’t have to accept it, but if you don’t, your current SMI benefit will end in April 2018.
For more information, go to the Government website: https://www.gov.uk/support-for-mortgage-interest/how-to-claim
Author: Christian Lister
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic.
Published on 9th October 2017
(Last updated 21st March 2018)