Thousands of retirees could get mortgage help through a Support for Mortgage Interest (SMI) loan if they are in financial difficulty. Experts state that if you own your home and are having trouble paying the interest on your mortgage, you may be eligible for this support.
Age UK explains that an SMI loan is designed to help people pay for the interest on their mortgage payments or other eligible home improvement loans. It is also known as Help with Housing Costs.
If you have enough equity in your home, the money you borrowed will be repaid later, either when the property is sold or when it is passed on to someone else. It may also happen through your estate after you die. SMI cannot help you pay anything towards insurance policies, and it cannot help towards missed mortgage payments (arrears).
How much help do you get for the Support for Mortgage Interest loan?
Age UK states: "If you don't receive Pension Credit, you could get help paying interest on up to £200,000 of your mortgage or loan. If you do receive Pension Credit, you could get help on up to £100,000 of your mortgage or loan."
"In most cases, the SMI payment is made directly to your lender. Interest is currently calculated at a rate of 3.66%." It adds: "You'll be charged 'compound' interest on an SMI loan, which means each month's interest is added to your total borrowed amount when the next month's interest is calculated."
Because of this, compound interest on an SMI loan may "mount up more quickly than you'd expect" with Age UK cautioning that it may leave you with "less equity in your home". With this in mind, the experts urge people thinking about this loan to "consider your options carefully before going ahead."
In an example, gov.uk explains that if someone is on Universal Credit and has £250,000 of their mortgage left to pay, they should be eligible for SMI for up to £200,000. At the current SMI rate, you'll get a loan of 3.66% of £200,000 across a year. This is £7,320, which will be paid as £610 per month.
Am I eligible for Support for Mortgage Interest?
You might be eligible for SMI if you receive one of the following benefits: Income-related Employment and Support Allowance (ESA), Universal Credit, or Pension Credit.
In addition to claiming one of these benefits, you need to be responsible for paying mortgage interest or have a qualifying home improvement loan. Gov.uk states: "There's no guarantee that you'll get SMI for a mortgage or loan you take out."
For more information on eligibility, keep up to date with the official gov.uk website. It urges people who are struggling to contact the relevant office to claim SMI, adding that no credit check is required.
How to apply for Support for Mortgage Interest
How you should apply for SMI depends on what other benefits you currently receive. If you receive Income Support, income-based Jobseeker's Allowance (JSA) or income-related Employment and Support Allowance (ESA), contact Jobcentre Plus. If you receive Pension Credit, contact the Pension Service. If you receive Universal Credit, contact the Universal Credit helpline.
The UK Government notes that before filling in the form, you'll need to: find out how much of your mortgage or home improvement loans you have left to pay, find out how much interest you're paying on your mortgage or home improvement loans, and get your partner to agree to sign the form, if you have a partner.
Once you have these details confirmed, you'll need to send the form to your lender for them to complete. Your lender will send the completed form to the office that pays your benefit. If you qualify for SMI, you'll be offered a loan, and you can choose to accept or reject it. If you turn down the offer, you can accept it at any time as long as you're eligible for SMI. Payments to your lender can be backdated to when you were first entitled to the loan.
Government urges people to talk with your lender
Before making any decisions, talk to your lender, gov.uk stresses. Some lenders can offer other ways to help, such as temporary payment holidays, interest-only payments or extending your mortgage term to reduce how much you pay per month.
