What is the Support for Mortgage Interest (SMI) Scheme?
Support for Mortgage Interest (SMI) is a loan you can get from the government to help make the interest payments on your mortgage (or on a home improvement loan). Here’s how it works, and some other ways to get help to pay your mortgage, if you don’t qualify for SMI.
How SMI works
If you qualify, you can borrow up to £200,000 to pay your mortgage interest (although the amount you’ll get is capped based on a calculation of how much interest is due).
The loan can only be used to pay the interest on your mortgage or home improvement loan. You cannot use it to repay the amount you borrowed, any repayments you’ve missed, for insurance policies (such as mortgage protection), or for anything else.
How to get an SMI loan
You’ll be offered an SMI loan, if you’re eligible for one, when you apply for a qualifying benefit (listed below). If you’re already receiving one of these benefits, or if you’ve previously turned down an SMI loan, you may still be able to get one by contacting the office that pays your benefits.
Who it’s for
You can usually only get a Support for Mortgage Interest loan if you receive one of these benefits:
- Income Support
- Jobseeker’s Allowance
- Employment and Support Allowance
- Universal Credit
- Pension Credit
You cannot currently be receiving statutory sick pay, statutory maternity/paternity/shared parental/adoption pay, or income from employment or self-employment.
Repaying the loan
The loan doesn’t need to be repaid until you sell your home or transfer ownership of it to someone else. At this point, any money you make must first pay off the mortgage and any other loans secured on the property.
With the money left over, you’ll repay your SMI loan with interest (3.03% at the time of writing, February 2023). If you don’t have money left over, or there’s only enough to partially repay the loan, the remaining debt is written off.
Alternatives to SMI
Unfortunately, many people who need help with their mortgage repayments are not eligible for Support for Mortgage Interest. However, you may be eligible for one of the following alternatives:
Mortgage payment holiday
Some lenders will let you pause or reduce your mortgage repayments for an agreed period, particularly if you have overpaid your mortgage in the past.
You could shop around for a better rate to reduce your repayments or remortgage to extend your mortgage term (thereby repaying the debt in smaller instalments).
Debt consolidation mortgage
If you’re struggling to budget for your mortgage repayments and other debts, a debt consolidation mortgage can group them together as one monthly payment.
Switching from a capital repayment mortgage to an interest-only mortgage can significantly reduce the amount you need to repay each month.
Each of these options has advantages and disadvantages, so it’s best to talk them through with an expert. To speak to a mortgage broker about your options, get in touch.