What is Support for Mortgage Interest?

Support for Mortgage Interest (SMI) is the collective name given to the financial help with mortgage interest payments which can be made to certain benefit claimants.  SMI can also help with the costs of certain loans secured on a property. 

SMI can be claimed by people who are in receipt of

• Income Support
• Income related Employment and Support Allowance
• Income based Jobseeker’s Allowance
• Pension Credit
• Universal Credit

Why is SMI in the news?

The rate at which SMI is paid decreases on 18 June 2017. This will mean a reduction in the amount of help that many homeowners receive towards their housing costs and could lead to an increased threat of repossession and homelessness.

How can homeowners apply for SMI?

Anyone who claims one of the qualifying benefits will be asked if they are a homeowner and, if they answer yes, whether they have any mortgage or secure loan payments.  The homeowner will have to include details of these loans on his or her application for the qualifying benefit.

A few weeks before the homeowner can start to claim SMI, the social security agency should send out an MI12 form. Homeowners can also request this form from their local Jobs & Benefit Office. This form asks for more detailed information about the qualifying loans.

After completing the MI12, the homeowner has to send it on to his or her lender.  The lender will then complete relevant sections before returning the application to the social security agency who will process the claim.

When will a homeowner start to receive SMI?

Unless they are in receipt of Pension Credit, homeowners will have to wait 39 weeks before they’ll get any help with their housing costs. Those in receipt of Pension Credit will start to receive help immediately. 

What housing costs are eligible?

Assistance can be offered on mortgage interest payments and certain secured loans up to a total level of £200,000.

While SMI can help with the costs of certain loans secured on the property, not every loan will be eligible.  A loan will only qualify if it was taken out in order to pay for certain essential home repairs and maintenance.  A homeowner would not get any assistance for a loan which was used to finance a holiday or for non-essential improvements, such as adding a conservatory to the property.

How much SMI will a homeowner receive?

It can be quite difficult to calculate the amount that a homeowner will receive. For this reason, homeowners affected by June 2017’s rate cut are advised to contact their local Jobs & Benefits Office to find out exactly how much their payments will reduce by.

To calculate someone’s SMI, the social security agency will need to know

• the eligible amount of the claimant’s loan or mortgage
• the balance remaining on this eligible amount
• the value of any arrears on the loan or mortgage.

This information should be supplied by the lender. 

The value of any arrears will be deducted from the remaining balance on the homeowner’s eligible amount.  This figure will then be multiplied by the current standard rate for SMI to give an annual figure. This annual figure is then divided by 52 to get a weekly figure, and payments will actually be made in four-weekly instalments.

Example of SMI calculation

Caroline’s remaining eligible balance is £100,000. She has no arrears. The standard rate of interest used from 18 June 2017 is 2.61%.

Caroline’s annual SMI payment will be £100,000 x 2.61% or £2,610. Her lender will receive this in 13 4-weekly instalments of £200.77.

How is Support for Mortgage Interest paid?

SMI payments are made directly to the claimant’s lender every four weeks. In most cases, SMI payments will be less than the borrower’s minimum monthly payment and the borrower will have to make up the difference.

How long will payments continue?

People who are claiming Income Support, income-related ESA or Pension Credit will continue to receive SMI while they claim these benefits. SMI claimants who are receiving income-based JSA can only receive mortgage interest help for a maximum of two years.

Helping homeowners in debt

Housing Rights has many years of experience helping homeowners who are in debt. You can contact our advice line by calling 028 9024 5640. If you provide advice to homeowners or tenants on debt issues, keep up to date with the latest news and training opportunities by signing up to our newsletter.