Summary: This article looks at the government funded scheme, Support for Mortgage Interest (SMI).
Support for Mortgage Interest (SMI) is a scheme funded by the government, to help those on income related benefits with their mortgage. The scheme, originally due to expire in January 2013, has recently been extended until March 2015.
What does SMI include?
SMI will cover the interest on any mortgage, or loan taken out for home improvements, up to the value of £200,000. For those on pension credit, the value is £100,000. It is usually paid directly to the mortgage lender.
What does SMI not cover?
SMI is only to help with the interest of the mortgage or home improvement loan. It will not cover the amount borrowed. Furthermore, it won't help pay for any mortgage arrears (missed payments).
Who is eligible for Support for Mortgage Interest?
It is important to bear in mind that there is no guarantee that SMI will be paid. SMI could be available for anyone on income related benefits. This includes Income Support, Income based Jobseekers Allowance, Income-related Employment and Support Allowance or Pension Credit. To establish if eligible, an individual should contact their local Job Centre Plus or their Pension Service. There is no maximum length of time that SMI will be paid, except for those on Income Based Jobseekers Allowance, when SMI will only usually be paid for a maximum of 2 years. It is also important to note that, since January 2009, there is a 13 week waiting period from the date benefit is claimed to when SMI can be paid. This means that a claimant must have been effectively unemployed for at least 13 weeks before SMI will be paid. Those on Pension Credit are eligible for help immediately.
How much of my mortgage interest is covered by Support for Mortgage Interest?
SMI is currently based on the Bank of England's published Average Mortgage Rate. At the moment this is around 3.63%. As the actual interest rate of the mortgage is not taken into account, then it is possible that some of the mortgage capital could be repaid where the interest is lower than the amount covered by the SMI. Equally, if the interest rate is higher than that covered by the SMI, it is possible that the individual may find themselves in arrears if they are unable to pay back the difference.