Changes to Support for Mortgage Interest take effect from 6 April

From the 6 April 2018, Support for Mortgage Interest (SMI) will be changing to a loan.

SMI is a benefit paid towards the interest on a claimants mortgage and some home improvement loans. If a claimant does not opt in, SMI benefit payments will cease and they will have to pay their mortgage interest another way.

Notifying recipients of the change from benefit to loan

Most recipients of SMI should have received a letter from the Department for Work and Pensions (DWP) informing them about these changes.

The letter explains that recipients need to decide how to pay for their mortgage interest. Letters should be followed by a phonecall from Serco. Serco has been employed in Northern Ireland to give SMI recipients the information that the government needs to provide them with before they sign up to a loan.

When making a decision, recipients need to consider

• How much mortgage they have left to pay
• How much mortgage interest they pay
• How much DWP pays towards their mortgage interest and home improvement loans as an SMI benefit

Ways of paying mortgage interest

Having the information above will help recipients figure out the best way forward for them. Options include:

Accepting the offer of an Loan for Mortgage Interest

If a recipient accepts the SMI loan, DWP will keep on paying regular payments towards their mortgage interest and home improvement loans, but this will now be a loan, not a benefit.

The payment amounts will remain the same as long as the recipient’s circumstances stay the same.  All payments made after 6 April 2018 will need to be paid back (see below).

Talk with the mortgage lender

All mortgage lenders will be aware of the change to SMI. Recipients could contact their mortgage lenders to see if there are options to change their mortgage product to make paying their interest more manageable.

Use savings and investments

If a recipient has savings or investments, these can be used to pay mortgage interest or reduce the amount owed on the mortgage. Financial guidance or advice would be needed before doing this.

If the recipient cannot afford to repay their mortgage without SMI, and does not have any other funds available, they should consider taking the loan.

Repaying the SMI Loan

Voluntary repayments can be made anytime. The minimum amount that can be paid is £100, or the outstanding balance, whichever is less.

Otherwise the loan is paid back from equity when the property is sold or transferred.  If there isn’t enough money left to repay the loan in full, DWP will write off the remaining amount.

Compound interest will be added to the total amount owed to DWP until it is paid back or written off. The interest rate charged on the loan is forecast at 1.5% from April 2018; this will change to 1.7% from July 2018.

Other information regarding SMI Loan

• There are no fees to set up the loan
• There are no credit checks to set up the loan
• The amount owed will increase with every payment made.
• SMI is a secured loan
• Recipients will get a statement every year telling them how much they have borrowed and the interest added.
• Recipients can ask for payments to stop at any time.
• If income-based benefits change or end for the recipient, SMI loan payments may stop.
• The Department for Communities have indicated that where an existing claimant decides to opt into the loan scheme later, (not now), their claim can be backdated to the 6 April 2018.

Help and Support

Each recipient of SMI needs to decide if an SMI loan is the best option for them and their household.  Housing Rights advisers can offer free and impartial information on SMIs to loans. Call our helpline on 028 9024 5640.

Housing Rights will be offering a training course on 6 June that will offer an overview of SMI to loan and its impact of the first 2 months.

Anyone who has not received the letter should call DWP on 0800 731 0469 (if over State Pension Age) or 0800 169 0310 (if you’re of working age).