Support for mortgage interest loans ‘won’t become a benefit’

The government has ruled out changing support for mortgage interest (SMI) loans to a benefit.

SMI is a government loan to help a person pay the interest on their mortgage and is available to people on the following benefits:

• universal credit
• income-based jobseeker’s allowance (JSA)
• income-related employment and support allowance (ESA)
• income support
• pension credit

Anyone who takes out this loan needs to repay it with interest when they sell or transfer ownership of their property.

Liberal Democrat MP Steve Darling has asked the government if it will look at the merits of changing SMI back to a state benefit, rather than a loan.

But Stephen Timms, the social security and disability minister, has said there are no plans to change the current system.

“When SMI transitioned to a loan in April 2018, support was provided at the same level and therefore, it provides the same level of protection against repossession,” he commented.

“Loans are repayable from any available equity when the property is sold and therefore, the policy represents excellent value for the taxpayer whilst continuing to protect homeowners.”

What do I get if I apply for SMI?

If you apply for SMI and it’s approved, you’ll get the interest paid on up to £200,000 of your mortgage (up to £100,000 if you’re on pension credit). 

The government won’t help to repay the amount you originally borrowed.

A standard interest rate is used to work out how much you’ll be paid. This rate can go up and down, and may be different to the interest rate on your mortgage.

Payments are typically made straight to your mortgage lender.

You can get SMI for as long as you need it if you continue to meet the eligibility criteria.

How do I apply for SMI?

You’ll be asked questions to see if you’re eligible for SMI when you apply for the benefits listed above.

If you qualify, you’ll automatically be offered a loan.

If you decide to turn it down, you can change your mind whenever you wish, and any payments you get later will be backdated to when you were first eligible.

Will it affect my benefits or credit score?

No. An SMI loan doesn’t affect your benefits or your credit score.

Get free debt help 

If you’re struggling with your mortgage repayments and other household expenses, you can also speak to us.  

We can give you free and impartial advice on what benefits you’re entitled to, information on debt solutions and help with budgeting.