Support for Mortgage Interest (SMI) helps some people with the cost of their mortgage if they aren’t working.
Since 2018 this help has been paid as a loan secured on your house, not a benefit, see the gov.uk page on SMI.
But this loan is cheap, you don’t have to make any repayments to it until the house is sold and it does not show on your credit record, so this is not as bad as it sounds.
How much help does SMI give?
If you lose your job, you can’t claim SMI for 13 weeks if you claim Universal Credit – this used to be 39 weeks but it was reduced in April 2023. If you retire and get Pension Credit, it is paid immediately.
The help SMI gives will probably be less than your monthly mortgage payments:
- SMI only helps with the interest you pay on your mortgage, not the capital repayments.
- There is a cap on the maximum amount of a mortgage you can get help with. This is £200,000 for working-age claimants and £100,000 for pensioners.
- The amount of SMI you are paid depends not on your mortgage rate but on the average interest rate for mortgages. In autumn 2024 this is 3.66%. If you are paying a higher interest rate, you will less help than the amount you are charged each month.
So SMI is not a very helpful benefit – too little and too late!
But if you can’t pay the mortgage, even a little help can be better than nothing. So you should seriously look at taking SMI, even though it is only a loan.
How the SMI loan works
How the loan is calculated
Each month the loan will increase by the amount that the government is paying to your mortgage provider.
There is no credit check for this SMI loan, so you won’t be refused even if you could not remortgage as you have a bad credit record.
The government adds interest to this loan. This is charged at the OBR’s forecast of the gilt rate – the rate the government can borrow money at. In autumn 2024 this was 3.9%.
Repaying the loan
You don’t have to make any repayments to this loan.
This applies even if your finances improve, for example if you return to work. At that point, SMI will stop, but you don’t have to make any payments to the loan you have already been given.
The SMI loan doesn’t appear on your credit record. As a result, not making any payments will not harm your credit score.
The loan will be repayable when your house is sold, transferred to someone else, or on death.
If there isn’t enough money to repay the loan, the rest will be written off. This loan cannot become a problem for you if you sell your house or for your your children after you die.
But if you want, you can repay the loan, or part of it, at any time, with a minimum repayment of £100.
To accept the SMI loan offer
The DWP is offering this loan to you. The legal terms for the loan arrangements are described in this document.
To accept the offer, you have to sign the loan agreement and a charge form. If the house is jointly owned and you live together, your partner also has to sign.
The charge will then be registered at the Land Registry.
Should you agree to take the loan?
A lot of people find the idea of getting a loan to pay their mortgage very worrying. “It’s not right to get new debt to pay off other debts” is a common comment.
As I debt adviser I would normally agree! But this SMI loan is very unusual because it is cheap and you don’t have to make any repayments to it. So you need to think about your situation and make a practical decision.
You may hate the idea. But this SMI loan is a good option for most people who can’t pay the mortgage for five reasons:
- it is much cheaper than borrowing elsewhere;
- you don’t have a job so you probably can’t remortgage;
- if you don’t take the loan and mortgage arrears will accumulate, your house may be repossessed;
- you don’t have to make any repayments to this loan, even if you start work;
- it can’t harm your credit record.
Do you have a better option?
Do you have savings you can use? Most people don’t have much or they wouldn’t be able to claim Universal Credit or Housing Benefit.
It’s also not a good idea to use all your savings to delay the point at which you need the loan – that will leave you with problems if any repairs are needed to your house or if you have an unexpectedly large bill, so make sure you keep a reasonable emergency fund.
Could relatives help you out? Don’t let them borrow money to help you – this SMI loan is massively cheaper than they could borrow at and they would have to make repayments, you don’t with the SMI loan.
Planning to cut back elsewhere, or sell things from your house, could turn out to be very stressful and difficult – you may end up with mortgage arrears.
If you are unsure, go to your local Citizens Advice. They can help you look at the details of this loan and at the rest of your situation:
- for some people there may be other benefits you could claim;
- there may be better options for handling any non-mortgage debts you have.
Mortgage problems? what are your options
Options when you cant pay bills & debts
Selling the house – a hard choice
Leah says
Hi, I am currently unemployed and on Universal Credit
I have been offered the SMI loan to help with the interest payments on my mortgage.
The question is – if I apply and accept the loan will having the SMI loan affect me in the future if i wish to go back to work part time and wanting to RE-mortgage – (i’m with the natwest)
Also – Serco SMI suggests that it may be able to backdate the loan from when I was first offered it – who gets the backdated payment? – How would that work?
thank you so much
Sara (Debt Camel) says
What alternative do you have the SMI loan? Mortgage arrears aren’t good for later trying to remortgage either
Lauren Sherer says
They will only backdate to the mortgage company direct
Anna says
From what I understand going back to work doesn’t affect anything, but I am not an expert.
I applied years ago, I believe the form was about 60 pages long.
I sent it to Serco recorded delivery and they denied receiving it.
Can anyone tell me if the form is still this long please? (I can’t deal with paperwork. ) Thank you.
Sara (Debt Camel) says
probably, but your local Citizens Advice can help
Lauren Sherer says
The form was only a few pages, however I applied in July last year and it has still not been processed,
Heather Mann says
Will I lose all my smi if I work 2 hours a week. I’m currently on a long waiting list for a 2nd total knee replacement, the 1st one had failed. So I’m not able to do full time hours
Sara (Debt Camel) says
Until 2023, there was a ‘zero earnings’ rule so no SMI could be paid when a claimant or their partner was doing any paid work. But that was removed last year. I would be surprised if you will lose the SMU if you only work 2 hours a week, but it would be best to ask your local Citizens Advice to do a “what if” benefits check for you to be sure.
Billy says
Debt causes significant stress, with mortgages being the largest debt most people face. I had to take Support for Mortgage Interest (SMI) to keep our home. It’s crucial to note that SMI only covers interest, not the mortgage itself, despite misconceptions/misleading/misinformation that taxpayers fund the mortgage. Accepting SMI, signing over my home to the DWP, adding extra anxiety about losing my only home and security. Is it fair to penalize the most vulnerable for circumstances beyond their control? My house saves the DWP money compared to the higher housing benefits we would need if we rented in London with soaring rents.
May Stack says
Can someone who took SMI Loan tell me how does it affect ability to remortgage? So if I tak ethis now and 2 years later I remortgage ,will lender know there is a charge on my deeds? Also if you remortgage do you need a new loan to sign and another charge on?
Sara (Debt Camel) says
When you say Remortgage, do you mean with a different lender? Or just get a new fix from your current lender?
May Stack says
To be fair it doesn’t matter, ideally the best deal. My credit score is fine ,it’s juts because husband not working due to illness we are now on UC. So been send some info re SMI. I am just trying to plan ahead. When fixed rate end ,I will either accept current lender or go with another one,or woukd you advise what woukd the best course fi action if I was to go with SMI loan.Thanks so much for your help
Sara (Debt Camel) says
who is your current lender?
May Stack says
It’s Santander. Part interest (about 75%) and rest capital.thank you very much for helping.Really appreciate it.
Sara (Debt Camel) says
So Santander will offer you a new fix if you take the SMI loan or don’t. Does your husband have other debts? because another option would be to have low payment arrangements on those…
I think you need a debt adviser to help you both look at your options. Call National debtline on 0808 808 4000 or go to your local Citizens Advice.
Janey says
If I take SMI will it impact on my ability to get another mortgage when my finances improve?
Sara (Debt Camel) says
Are you currently on a fixed rate, if you are, when does this end? who is your mortgage lender?