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Money advice and rights team

Support for Mortgage Interest is changing

Does the Department for Work and Pensions (DWP) help with your mortgage interest payments?

From 6 April 2018 help from the DWP with your mortgage is changing to a loan. The DWP will write to you about this change and offer you a loan to help pay your mortgage interests.

The questions and answers below provide a brief explanation of the change taking place, but If you require any further details or advice on this please call the Money Advice and Rights Team (MART) on 0141 577 8420.

What is Support for Mortgage Interest benefit?

The Department for Work and Pensions (DWP) currently offers a benefit called Support for Mortgage Interest (SMI), also known as Help with Housing Costs.

SMI pays towards the interest on a mortgage and other eligible home improvement loans.

On 5 April 2018, the SMI benefit will end.

What is replacing Support for Mortgage Interest benefit?

Replacing SMI benefit will be SMI loans, which will be introduced on 6 April 2018. SMI loans will be offered to both new and existing claimants.

Claimants receiving Income Support, income-related Jobseeker's Allowance, income-based Employment and Support Allowance, Pension Credit or Universal Credit will be offered SMI loan payments.

How will SMI loans be calculated?

SMI loan payments will be calculated in the same way as the current SMI benefit, using the standard interest rate and outstanding mortgage capital limits in place:

  • For most working age claimants the limit is currently £200,000 outstanding mortgage and some home improvement loans
  • For pension credit claimants the limit is currently £100,000 outstanding mortgage and some home improvement loans.

The interest rate can be revised twice a year, with any changes (up or down) taking effect on 1 January and 1 July.

How and when will an SMI loan be repaid?

A claimant will have to repay the total of the SMI loan payments made plus interest from any remaining equity once their property is sold or ownership is transferred.

If there is not enough equity available to repay the SMI loan in full, the amount of SMI loan that cannot be repaid will be written off.

Alternatively, the claimant can make voluntary repayments at any time (e.g. on the return to work of a working age claimant). The minimum amount that can be voluntarily repaid at any one time will be £100. The full amount can be repaid if the SMI loan amount is less than £100.

Once the SMI loan has been repaid in full, any charge that was placed on the property will be removed.

There will be no early repayment fees.

How can I find out more about SMI loans?

The DWP will contact existing claimants before April to provide them with the information they need to make an informed decision about whether to accept the offer of an SMI loan.

Current claimants will receive a letter and an information leaflet on SMI loans. These are being sent out by a company called Serco on behalf of the DWP; however the loan itself is from the government, not from Serco.

The letter and leaflet will explain the "offer" of a loan. It is an offer because the claimant does not have to accept it, but if they do not, their SMI payment will end in April 2018.

What do I do if I want to accept the SMI loan offer?

To accept the SMI loan offer, claimants are required to have a telephone conversation that will outline their other options.

The claimant (and partner if the house is jointly owned) will then need to sign the loan agreement and a charge form. This documentation is over 60 pages long and it is essential that it is read fully.

The charge will be registered at the Land Registry. This means that if your home goes up for sale you will not be able to release the proceeds of the sale until any money owed to the DWP is repaid.

If there is anything within the documentation that you are unsure of, or if you have any further questions on the documentation, MART can help. Call the team on 0141 577 8420.

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