I’ve had a letter saying that my Support for Mortgage Interest (SMI) is ending. What does this mean?

The Department for Work and Pensions (DWP) offers a benefit called Support for Mortgage Interest (SMI). It's also known as Help with Housing Costs. SMI pays towards the interest on a mortgage and other eligible home improvement loans. You can only claim SMI if you’re getting an income-based benefit such as Income Support, Income-based Jobseekers Allowance (JSA), Income-related Employment Support Allowance (ESA), Universal Credit or Pension Credit.
 
On 5 April 2018, SMI benefit will end. The new Loans for Mortgage Interest system will pay your interest as a loan. This may be secured by placing a second charge on your property.
 
If you haven’t accepted the loan, you will need to look at other ways in which you can pay the interest on your mortgage. You should have something in place starting from 6 April 2018.
 
Read more about the changes in The Loans for Mortgages Regulations 2017 Explanatory Memorandum (pdf download).

I haven’t got much time to decide. Can I refuse the loan and apply later?

If you want the loan, apply before 5 April to avoid a gap in mortgage payments. You can accept the offer of an SMI loan at any time, provided you receive a qualifying benefit and sign and return the loan documents sent by DWP. There is no commitment unless you sign and return a copy. If you don’t accept the loan, you need to ensure that you’re able to pay the interest on your mortgage.

What is the interest rate?

The interest rate charged will be based on the Office for Budget Responsibility’s forecast of gilt rates. This is currently 1.7% and can be revised twice a year, with any changes (up or down) taking effect on 1 January and 1 July. 

What is a ‘a charge on my property’?

If you apply for the loan, the DWP may place a second charge on your property. This depends on your lender. Charges on a property use your home as your security for a debt. A second charge mortgage works like your first mortgage; your home is at risk if you don’t keep up the payments or keep to the terms of the agreement. The debt isn’t repayable until the property is sold or you go back to work. If you sell your home, the first charge mortgage gets cleared in full before any money goes towards the second charge. Read more about Second Charge or Second Mortgages from the Money Advice Service 

The DWP would only be able to claim back the loan plus interest if you sell or transfer your property. If you are in negative equity (your house is worth less than your mortgage), the loan or part of it would be written off, depending on circumstances at the time.

You don’t pay for SMI until you sell your property or you go back to work. If there is no equity in the property when you sell, the DWP will write off the debt.

What happens if I sell my property?

At the time of sale/transfer, the outstanding loan would be repaid out of any remaining equity. This is a big step: don’t forget the extra costs involved with selling and buying such as estate agents, solicitors, removals and adaptations!  

Are there any other options? 

Options available will vary for every individual so seek advice if you can. Here are some ideas to consider though if you’re not able to get advice.
  • You could try to meet the payment out of your existing income with changes to your budget. This could be difficult if you’re already on a low income and depends on how much you need to meet the interest payments.  
  • Use our benefits calculator to make sure that you’re getting all of the benefits and extra help you might be entitled to.   
  • Talk to your lender at an early stage. There are different types of help they can offer and they will want to help.  
  • If you’re struggling with your mortgage payments, contact Shelter who have a Mortgage Debt Advice team or your local Citizens Advice.
  • See Mortgage Arrears Guide from National Debtline. 

What if there are delays in setting up the loan? 

Existing claimants of SMI can have transitional help for a temporary period in which they can still receive SMI as a benefit.
 
Where an existing claimant lacks mental capacity to make decisions about entering into the loan agreement, the regulations enable SMI as a benefit to continue until an appropriate person (such as a Deputy) can act on the claimant’s behalf.
 
New claims will not get this transitional protection. 

My parents want to pay my mortgage interest for me direct to my lender. Will this affect my benefits? 

If the money is for your housing costs and isn’t paid directly to you, there should be no effect on your benefits. However, seek advice before starting any payments.

I get support to pay my service charge. How will the SMI change affect me?

Service charges are separate to the changes affecting mortgage interest. If you get some help with your service charges, this should continue.

Are there charges to set up a loan?

No, you won’t be charged administration fees to get the loan payments. However, if you need to get legal or financial advice to help you understand and complete the loan documents, the DWP can’t pay for these costs but will signpost you to organisations that can offer free help and support.  

Will I still be able to claim Income Support if I don’t take out the SMI loan?

Yes, you will still be able to claim Income Support if you don't take the loan. This also applies to income-based JSA, income-related ESA, Universal Credit and Pension Credit.

I receive Council Tax Support (CTS). How will the SMI change affect me?

Council Tax Support shouldn't be affected if you remain entitled to means-tested benefits such as Income Support or income-related ESA. However, you should tell your local council about the change. This is particularly important If you’ve only been receiving SMI payments. The reason for this is that you may have been 'passported' to a certain amount of council tax support based on SMI being counted as a means-tested benefit.

If I bought a mobile home and the ground/site fees are £100 a month, would I be entitled to support for these payments? 

If you own your mobile home, you can get Housing Benefit to help pay your pitch or site fees but not if fees are paid under a long lease. Housing Benefit won't cover hire purchase fees for buying your home.

What about Universal Credit?

This year, several benefits will be replaced by Universal Credit. If you're on a means-tested benefit such as income-related ESA, Income-based JSA, Income Support, Child Tax Credit, Working Tax Credit or Housing Benefit. It’s important to find out more about Universal Credit and when you’ll be affected. There are certain changes in circumstances which can lead to a new claim for Universal Credit such as moving into a full-service area. If you’re thinking of selling your home, check if the area you’re moving to is a full-service Universal Credit area. You can find out more about Universal Credit including FAQs on the Scope website. 

Where can I get advice about my personal situation?

A company called Serco is acting on behalf of DWP to tell people who receive SMI about these changes. Serco cannot give you advice, but they can provide information about the changes.

The Money Advice Service website has information about getting free financial help and information
 
If you need help finding advice, please get in touch with Scope helpline.

We’re not qualified to provide financial advice but we can talk through other issues and help you explore your options.
 
See the discussions on our online community for examples of what others going through these changes are doing to prepare and find information. Add your comments and encourage others to join in.

Is there anything I can do to complain?

There's still some time to campaign. If you are affected by the changes or know someone who is, consider writing to your local MP.
 
Please share with us your experiences, problems and tips so that we can pick up on early emerging trends. If you're interested in this, please contact the helpline.
 

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