Support for Mortgage Interest (SMI) helps people with the cost of their mortgage if they aren’t working. It has been paid as a benefit since 1948, but in April 2018 this changed and now it is only given as a loan that is secured on your house.
Here is the DWP leaflet describing the new loan: DWP SMI Factsheet (6 April). You may see LMI (loans for Morgage Interest) used as the new name for this, but the government still uses the term SMI.
There are about 100,000 people eligible for SMI in 2018:
- about half are pensioners getting Pension Credit. They tend to be on SMI for long periods and often have an interest-only mortgage;
- the other half are younger, not working and receiving one of: JSA; ESA; Income Support; or Universal Credit.
How much help does SMI give?
If you were getting SMI before April 2018, the answer is simple – you will get the same amount as you were getting before April 2018, it is just being paid in the form of a loan, not as a benefit. It will be paid directly to your mortgage lender each month just like the benefit was.
If you lose your job, you can’t claim SMI for 39 weeks. Many people don’t have enough redundancy pay, savings or insurance to get them through to this 39-week point, so by the time SMI starts being paid, you may already have mortgage arrears.
The help SMI gives is likely to be less than your monthly repayments for three reasons:
- 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.
- SMI is calculated based on an artificially low rate – the average interest rate for new mortgages. In June 2017 it was reduced to only 2.61%. This is unfair. Most SMI claimants have older mortgages and are likely to be paying much more interest than that and they are not working so they can’t remortgage on good rate new deals.
How the loan works
In September 2017, the DWP started sending letters to people who were getting SMI to explain what is changing and say that they will receive a phone call from Serco within the next three weeks to explain it further. The loan itself is from the government, not from Serco.
The letter explained the “offer” of a secured loan. It is an offer because you don’t have to accept it, but if you haven’t, your current SMI benefit will end after April 2018. There is no option to stay on the current benefit. The legal terms for the loan arrangements are described in this government document.
How the loan is calculated
Each month the loan will increase by the amount that the government is paying to your mortgage provider plus the interest added
Interest will be charged on the loan at the OBR’s forecast of the gilt rate – this is the rate the government can borrow money at so it is low compared to normal loan and mortgage rates. In October 2018 this is 1.7%.
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 you won’t be able to get more SMU help every month, but you don’t have to make any payments to the loan amount you have already been given.
But if you want, you can repay the loan, or part of it, at any time, with a minimum repayment of £100.
The loan will be repayable when your house is sold, or transferred to someone else, or on death.
If there isn’t enough money to repay the loan, the rest will be written off, so this can’t become a problem for you if you sell your house or your children after you die.
To accept the offer
To accept the offer, you first have to have a telephone conversation that will outline your other options – basically getting help from friends/family instead of the new loan or deciding to sell your house.
Then you (and your partner if the house is jointly owned and you live together) will need to sign the loan agreement and a charge form. The charge will 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 a new debt to pay off other debts” is a common comment.
And as I debt adviser I would normally agree! But this SMI loan is very unusual – n0t only is it cheap but you don’t have to make any repayments to it. So you need to think about your situation and make a practical decision.
It’s a cheap loan – is it a problem?
You probably don’t have any better options, see below. But this loan from the government isn’t good news for two groups of claimants:
- if you are only temporarily out of work – perhaps while your children are very young or until you find another job – then having this secured loan will reduce your equity and make it harder for you to remortgage at a good rate in future.
- if you are a pensioner with an interest-only loan, you may have been hoping your equity will build up over the next few years until your mortgage ends. This new secured loan will reduce the equity you end up with – this may make it harder to get a new mortgage, or equity release, or to downsize to somewhere with no mortgage.
At the moment, mortgage companies are slow to repossess a house if there are mortgage arrears. It is possible that if you don’t have a lot of equity, this secured loan will mean your mortgage company may decide to repossess sooner… but it will be a while until it’s clear if this is a problem or not.
Do you have a better option?
In practice this SMI loan is a good option for four reasons:
- it is cheaper than you could get from a bank;
- you don’t have a job so you probably can’t remortgage;
- if you don’t take the loan and mortgage arrears accumulate, your house is likely to be repossessed;
- you don’t have to make any repayments to this loan, even if you start work.
So, unless you have a lot of savings you could use, or there are relatives who could help you, you probably should take the 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.
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.
If you are unsure, go to your local Citizens Advice and ask for their assistance, to look at this loan and at the rest of your situation, including your benefits and other debts.
How many people are taking the loan
By 3 October 2018, six months after the switchover was supposed to have happened, the DWP has successfully contacted 101,000 people who are eligible for SMI – 96% of the total number. Of these 101,000:
- 70% have decided not to take the loan;
- 22% have decided to take the loan – of these about three quarters have completed the loan documentation and the other quarter are in progress;
- 8% are still undecided.
You can change your mind if you have rejected the loan
In October 2018, DWP statistics showed that 70% of people have rejected this loan – that is a lot more than the government expected.
It is worryingly high, as some people may be struggling trying to make their mortgage repayments without the help from SMI.
In March the DWP decided to allow people to change their mind and switch to getting the new loan. If you do this, there won’t be a “waiting period” because you have been eligible to get the loan since April, when your SMI benefit payments stopped.
So if you think you made a hasty decision to reject this loan and you are now worried about getting into arrears with your mortgage, you should contact the DWP (telephone numbers below) and say you now want to take the loan. If you do this, the loan can be backdated back to April if you want – that may help you clear some mortgage arrears
DWP telephone numbers for SMI issues
If you are over State Pension age:
Telephone: 0800 731 0469
Textphone: 0800 731 0464
Welsh language: 0800 731 0453
If you are under State Pension age:
Telephone: 0800 169 0310
Textphone: 0800 169 0314
Welsh language: 0800 328 1744
Media coverage of SMI
Take our loan, or lose your home… Vulnerable property owners face a (costly) offer they can’t refuse – as official safety net is snatched away (Mail 31 October 2017)
Anger as thousands unaware they face a ‘second mortgage’ (Guardian 5 February 2018)
Radio 4 Moneybox (17 March 2018) with the DWP minister – and me!
Major mortgage benefit is being axed – and thousands of people STILL haven’t been told on the phone (Mirror 19 June 2018)
This article was first published in August 2017 but it is kept up to date.
Should you remortgage after a fix ends?
Selling the house – a hard choice
Options for repaying an IO mortgage
Brian Caffrey says
I received a letter some days ago, dated April 5. In it they state that because I am now £1.38 over the minimum to live on, I am no longer entitled to Guaranteed Pension Credit, and have been switched to Savings Credit. Distracted by health and other issues, I only just came to realise this morning that the £30.12 paid weekly to my lender has stopped, that from somewhere in Cuckooland, I am supposed to find a replacement £130 a month, which most certainly will finish me off. I am still in recovery from major heart surgery, very tired, and now they have dumped this on me. I have no one to turn to, and the prospect of appealing is terrifying for me, as I have mental health issues too.
I’m not gay, but most surely have had enough, and thinking of doing a Dale Winton. After all, they do want me dead, so now, at age 71, my life in penury will not be worth living, so I may as well give them what they want.
Sara (Debt Camel) says
It is dreadful having to sort this sort of stuff out when you are ill, but I suggest you need to get to your local Citizens Advice as soon as possible to see if you should still be entitled to SMI and if not, what your options are.
Brian Caffrey says
I surely cannot be the only person to have received such a miserable letter, advising change to Savings Credit, having been advised that they no longer qualified for Guaranteed Pension Credit.
I had finally posted the loan application, duly signed, together with the legal charge document, also signed on March 16, and a few weeks ago, received formal acknowledgment, at which time I assumed that the new arrangement was in place, and ready for implementation.
I have however received no such mailing from the SMI loan department/ people, and now remain in weekend limbo torment.
Thus I have absolutely no idea what the Hell is going on.
Elsie says
Hello Sara,
I thought you might be interested to learn that not even a month has passed since the introduction of the SMI/LMI and our mortgage company is currently reviewing our mortgage with a view of taking us to court to get us out! We ran up arrears when my partner first became ill and our mortgage company gave us a payment holiday until the SMI started. The SMI didn’t meet our full subscription, so we made up the full mortgage subscription ourselves plus, initially, a token amount towards the arrears. Following advice, we’ve been paying off our arrears at the Norgren level (arrears settled in full by the end of our mortgage terrm). Our agreement is usually reviewed every 6 months and, after being put through the wringer, a payment plan is agreed. This time though, it seems from the calls so far, that due to the unknown amount that we will incur as the SMI loan/interest, the mortgage company intends to proceed to court as I turned an AVS down. Last year, the mortgage company turned down a grant that needed a non-financial charge too!
Sara (Debt Camel) says
which mortgage lender is this?
I think you need to talk to the debt adviser/solicitor that helped you get the Norgan repayment agreed as to what your options are.
Elsie says
Hello Sara,
Thanks for your reply. I’m working on professional advice and also seeing our MP. I’m reluctant to name the mortgage company just yet.
Sue Fletcher says
Hi Sara.
Some time ago I wrote that I had not heard anything from the DWP to say whether or not they had actually got my forms…as expected they said they had but could not tell me any more as there was a “backlog” but could not state how long this was. Well yesterday I had a letter from DWP to say that from 10th April they would no longer be taking money from my “allowance” to pay the mortgage to Halifax. It seems that after a phone call to Halifax (by me) that the money IS being paid direct to them from DWP – the fact they haven’t told me I have qualified for the loan seems to have gone by the by. Is this usual? Do they not tell you that you are getting the “loan”? I thought they might have notified me that everything was going through OK But perhaps I am hoping for a bit too much from them!
G Wallace says
If you are a shared ownership HA tenant, the HA does not allow loans to be secured against home???
Sara (Debt Camel) says
I’m going to tell you what I think will happen here, but I am not an expert in housing law and I suggest you call Shelter’s very good housing helpline: https://england.shelter.org.uk/get_help to discuss this.
There is a provision in the SMI rules (paragraph 7.19 in http://www.legislation.gov.uk/uksi/2017/725/pdfs/uksiem_20170725_en.pdf) that where there is another owner of the property (the Housing Association in this case) a charge won’t be used but you will be asked to sign “an equitable charge” instead. The HA doesn’t (I think) have to agree to this. The end result for you will be much the same as a charge would have been.
Sue Fletcher says
Hi Sara
Good news – I have FINALLY received my letter confirming the SMI loan WILL be paid (direct to the lender) but only after I had to get on to my Mortgage lender (yesterday)….funny that eh? Still at least I now know for definite where I stand debt wise. Thanks for the advice you give, not only to me but everyone on here. X
B Caffrey says
hello Sue
For precisely the same reason that the Pension Service’s letter had been very unclear, and because of concern whether I possibly no longer qualified for a loan (because of the careless ambiguity of their words,) I was in torment from Saturday morning until Monday morning, when I was finally able to make contact with the Pension Service. So, the loan payments will be forthcoming
With rubbish rates of pay, it seems that the Pension Service cannot afford to engage articulate people. Their last pair of letters both bore incorrect telephone numbers
Harry says
I know it’s slightly off thread but if as result of losing SMI and being changed to the loan scheme you have lost Pension Guarantee Credit and moved to Pension Savings Credit you may be aware that you’ve lost the benefits that you were previously entitled too. However, please note that it is open to you to apply to your Council for Council Tax Support and to the NHS for help with health costs on form HC1. If you have “low Income” you may still get some help.
RMD777 says
Reply ref. Harry.
Hi,
Are you saying SMI is being automatically replaced by LMI? And this causes Benefits to change? I am not of pensioner age if that makes a difference. If I was are you saying you lose Council Tax & health cost support?
Thank you,
Russ.
Sim says
Harry, The loss of Guarantee Credit is a pain to many who find they are a few quid above the £163 single or £248 couple limit.
Have paid years of council tax and had to pay for dentist. Cost me more than that few quid!
The withdrawal of SMI was just too much as I only had State Pension to cope on.
Driven to do something I phoned DWP and applied for Pension Credit. Lots of questions later they confirmed I qualified for Savings Credit.
A few weeks passed and their new assessment gave both Pensions Credit Savings Credit and Pension Credit Guarantee Credit. The Guarantee
was worked out by adding Housing Costs for the weekly interest that SMI no longer pays since April so £163/week plus £12 interest I pay my mortgage provider per week meant my State Pension of £165 now gets the guarantee.
So contrary to some pessimistic posts about SMI withdrawal loosing people other benefits this did not do that.
Gareth Morgan says
“The Guarantee was worked out by adding Housing Costs for the weekly interest that SMI no longer pays since April so £163/week plus £12 interest I pay my mortgage provider per week meant my State Pension of £165 now gets the guarantee.”
This is not the case. Unless you have extra needs, because you are a carer, disabled or have some housing costs like ground rent or service charges, you shouldn’t get Guarantee Pension Credit on those figures.
Sara (Debt Camel) says
I agree with Gareth. In general, housing costs do not form part of the Guarantee Pension Credit eligibility calculation.
I accept the point that someone with PC may be able to manage a very small monthly mortgage payment and so manage without the SMI loan. But the points you seem to be making about general benefit claims are not widely applicable.
Anyone who has benefit issues, including pensioners, should consider going to their local Citizens Advice for a full benefit check-up – are their current benefits correct? is there anything else that they could apply for? The SMI changes may make this more urgent for some people,
Sharon says
Just wondering about a scenario….
I have accepted the loan and it has started paying towards my mortgage interest now.
If I were to move into my partner’s home, but keep the flat going and possibly rent it out for while, would I still be able to continue with the loan until I sold the property? I would no longer be in receipt of ESA if I were to move into my partner’s property. But as it is now a loan rather than a benefit, I can’t see why I wouldn’t be entitled to continue with it? In fact I would’ve thought it would be in the DWP’s interest to continue with it…
The person I spoke with at the DWP wasn’t entirely sure!
Sara (Debt Camel) says
Well obviously you wouldn’t get any more SMI loan payments in that situation. But I don’t think you would be obliged to repay the SMI loan, although that might well be sensible as you would have to get permission from your mortgage lender to let out a property – that may be less likely if there is another secured loan on it.
Poppy says
Will we get notice when SMI kicks in as I have heard nothing back from anyone?
Cathy says
They have continued to pay my mortgage lender from April 9th.at the same rate as before without letting me know. However I received a letter today May 10th from Dwp informing me of this, they say a separate letter is to follow explaining the interest rates.
I would advise you check with your mortgage lender !
Lynn Jones says
I have been getting SMI it a joint mortgage I have moved out on trial separating would my partner be able to get it in his name or could I carry on getting in my name were both unemployed
Sara (Debt Camel) says
It sounds as though your partner is likely to qualify for SMI. You will presumably need help with your housing costs from Housing benefit or universal credit – I suggest you both go to your local Citizens Advice and they will look at both your benefit options.
gmack says
finally received the letter and booklet from dwp asking that i provide them with a phone number so they can give it to serco and obviously keep a record of it for themselves and my question is as follows, is it mandatory to give the dwp a contact number so they can pass it on to serco or can i just do nothing as do not require one of their loans
Sara (Debt Camel) says
If you don’t want a loan to replace the SMI then you don’t have to give a contact number. Do you have another plan for how to manage without the SMI?
gmack says
At the moment it’s only £12pw so the plan is do nowt
Elizabeth Glover says
I have been moved to SMI loan scheme and was on Income support ESA support group and receive a small Occupation pension. Now I find out because the Help with interest SMI, my ESA has been converted to contribution based and I loose council tax benefit, free prescriptions and NHS costs. All because of this new change to loan….. It puts me in a position that contributions based worked out slightly more a week. I am so much worse off I have disability so my prescriptions amount to 14 a month, I have abdomen tooth so can’t afford the dentist and my eye test is due dam dam this conservative government . I just read that if you are on contribution based ESa you are not entitled to SMI does this mean the loan stops.?
Sara (Debt Camel) says
Hi Elizabeth,
I think you need to talk to someone about your benefit situation and what your options are – I suggest your local Citizens Advice. I am not sure how you can have been moved to contributions based ESA.
Ja1234 says
Hello Sara,
I applied for the lmi about 4 weeks ago, I’m still to hear back. I’m assuming that I will be entitled to it as I’m on income support, a career and receive child tax credits.
My partner has just moved in, he is not claiming benefits and though he is employed through his own company he is unable to work and signed off sick (he did work for 3 weeks back in April but that is the only work he has been able to do since the end of January).
Will I still be entitled to receive lmi?
Sara (Debt Camel) says
I can’t advise how your income support may be affected by him moving in. Sorry but I think you both need some benefit advice – go to your local Citizens Advice.
gary says
Hello Sara
My wife and I are carers and also guardians to small children, we ent back all the loan papers back in march and received a letter from the DWP saying all documents had been received and basically we will be in touch, we recently had a phone call from the mortgage provider saying they have heard nothing since 9 April from DWP when they were informed that the payments would stop, no payments have been made and we are now 2 moths in arrears so we phoned the help line to be told its a backlog caused by Clydesbank so we have to deal with them and cannot contact them ourselves, this is done through DWP so we are awaiting a call back. At no time do we remember authorising any share of information with any third party and are finding the delays and lack of comunication from DWP very alarming. We had contacted our MP who is eager to help.
John says
I am in a similar situation – giving up work to look after my two disabled kids. I must have been lucky I sent my form in late just before April, received acknowledgment of receipt quite quick then heard nothing until a couple of weeks ago. They have payed up until April and then started the loan
Sim says
Around half those affected by withdrawal of SMI in April are pensioners likely to be on a low income but maybe over the £163 single or £248 couple Pension Credit Guarantee limit.
Check with the DWP as they may add housing costs on to the £163 or £248 meaning you can still get the Guarantee as this increases the minimum the government says you need to live on each week.
That guarantee really does help! It reduces council tax and other health expenses like dental charges which many pensioners with a mortgage may still be needlessly paying since SMI stopped in April.
Gareth Morgan says
No. If you qualify for a loan, only because you would have received a benefit if SMI had still been included in your assessment, then you will not get any of the ‘passported’ entitlements that you would have received if benefits were actually in payment.
Sim says
Besides the point! Particularly for pensioners wary of the loan and second charge on their home. They mostly prefer to struggle on and pay the
interest themselves. So if you live on only the state pension but because you contributed forty years NI payments with Serps and Graduated
under the old scrapped forty year rule, find you are just over the £163 or £248 so lost the Guarantee where others who made less than 40
years NI payments rather unfairly, get the Guarantee, go for it!
I did and with the Guarantee save on council tax, health & dental charges and need not ask for the SERCO loan.
Gareth Morgan says
I don’t understand what you’re saying. If your income is too high, you won’t get the benefit. If it’s not you will. You’ll only get the add-ons if you get the benefit.
Sim says
Sarah, Sorry about the spacing error in my previous post!
Sara (Debt Camel) says
no problem, but like Gareth I don’t understand your point. I suggest you should go to your local Citizens Advice and they canhelp you look at your full situation.
Cathy says
Hello Sara,I am in receipt of Smi loan now.Can you tell me if my circumstances change and no longer get this,when will I be expected to pay back loan & interst ?
Sara (Debt Camel) says
No, you won’t. You only have to repay the loan when you sell the house.
Cathy says
Thank you.
Sim says
My point is if you are a pensioner with a small remaining mortgage and are considering the loan you may decide you could
cope without it if you can get the Guarantee Credit.
5 October 1953 and earlier You’ve already reached the eligible age to claim Guarantee Credit.
You can claim Guarantee Credit if your weekly income is less than £163 if you’re single, £248.80 if you’re a couple.
BUT DWP WILL ADD YOUR WEEKLY MORTGAGE COST TO THE £163 £248 SO YOU MAY QUALIFY FOR THE GUARANTEE IF YOUR
STATE PENSION IS HIGHER THAN £163 £248.
If your weekly income is higher than these thresholds, you may still claim Guarantee Credit if you meet one of the following
criteria: you have a severe disability,you are a carer; you have to pay *HOUSING COSTS LIKE A MORTGAGE!
Also people who’ve reached State Pension age before 6 April 2016 are eligible to claim the Savings Credit part of Pension
Credit. That too can help.
Clearly this won’t help those already getting the guarantee and still struggling to cope with very high mortgage.
They will accept the SERCO loan and let SERCO take any loss when the home is sold!
Sim says
Gareth Morgan says
July 1, 2018 at 2:44 pm
I don’t understand what you’re saying. If your income is too high, you won’t get the benefit. If it’s not you will. You’ll only get the add-ons if you get the benefit.
=========================================================================================
I’m saying “too high” regarding Pension Credit Guarantee is assumed to be income over £163 single and £248 couple and some pensioners are put off claiming, when they should not be, because they are a few pounds over those criteria. Particularly those who reported on debtcamel that they lost their Guarantee when SMI was withdrawn in April should ask DWP to look again whether their weekly mortgage
interest payments were taken into account by DWP in making that decision.
Gareth Morgan says
What date were you told that mortgage interest counted? Some people got letters saying this before the loan scheme came into force.
Sim says
On 14 June I wrote this to my local MP.
Dear MP,
Are you aware that being just above the Pension Credit Guarantee of £163 is a nightmare
for many older pensioners. Generally they may be a few pounds or even pence above the
£163 guarantee amount by having fully contributed to National Insurance under the old
now scrapped 40 year NI contributions rule. They worked through times when it was common
to not have pension rights with employers. Many will have given substantial service in the armed
forces such as the 15 years I served leaving just prior to 1975 when in that year it would have
gained a good pension.
We now get hammered for Council Tax, excluded from Ernest Bevan’s 1948 support for mortgage
interest rate withdrawn in April hitting thousands of poorer home owning pensioners. No help
for health costs such as dental treatments. All these costs can be overwhelming and exceed
the few pounds income over £163 several times over.
The present £163 Guarantee rewards those who made less or no contributions but it really is a
cliff edge for those who did contribute more but now wished they had not!
Can the Government please introduce a less drastic transitional slope rather than this cliff edge
Sim
The DWP decision of 27 June 2018 included housing costs for mortgage or home loan and the Pension Credit Guarantee.
Sim says
Typo SHOULD READ Ernest BevIn
Helpfulharry says
Before April I commented on this site that my interpretation of SMI rules was as Sim is now describing. Ie. You would still get SMI after April if A) If you got SMI pre April and B).your income was below your applicable amount after April (when housing costs where removed from calculations). DWP & Gareth disagreed with me. DWP letter dated late March gave both SMI and PC guarentee but one dated early April took it away we personally then chose to accept the loan.
Sim says
I no longer get SMI. I now pay my own monthly interest. I regained Pension Credit Guarantee despite my state pension
being £165.29/week because DWP added an amount for the weekly equivalent of my mortgage interest onto £163
which gave a higher amount the government says you need to live on.
Sim says
John Healey: Scrapping Mortgage Help Scheme Will Push Millions Closer To Homelessness
Shadow housing minister says interest rate hike will also heighten risk.
Interesting reading from Shadow Housing Minister. You should be able to Google it to read the full extract.
Mohammed says
Hello,
I had applied for the smi loan in march 2018 and still have not heard back. My mortgage lender is sending me repossesion letters as there has been arrears which have not been paid from the shortfall of smi payments. What am i suppose to do ? Please advise
Sim says
Phone DWP first and explain you urgently need the SML payments from the date you applied.
Sim says
I was phoned yesterday by the DWP asking if I wished to apply for the SML loan. I said no as I have been paying the mortgage
interest since April 2017. A year before SMI was withdrawn April 2018.
Just another case like many other pensioners who rarely heard from the DWP and unless you pro-actively ensure DWP have
assessed you correctly you are likely to be struggling. The DWP know thousands of low income pensioners are not claiming
their full entitlement but don’t expect them to contact you to ensure you are ok, because you will have to do that. It saves the
DWP a lot of money. So don’t be complacent if you or someone you know has been left for years to rot! Age Concern and
Citizens advice will help even when “doing it online” is a foreign country!
I asked the lady who phoned if she was from SERCO and very offended she said “No this loan is a DWP loan”.
Left me wondering if DWP are further distancing themselves from SERCO and why that might be!
deni case says
I have yet to accept the loan as I’ve been so reluctant and managed to keep going but it looks like I will have to at some point. This might be a silly question but-What happens if I want to/have to rent my house out and go away for a few months? Do I automatically then lose the loan which is dependent on pension credit plus lose the pension credit? / Do I have to ask their permission? Not sure at all what happens here. Thanks.
Sim says
Rent and go away would be a change of circumstance and add income.
Likely to risk loosing your pension credit while away.
Hope to reinstate PC later if DWP agree and still qualify for SMI loan?
You might consider taking a lodger which is less likely to lose your PC
Sim says
PS The first £23 of lodger’s rent used to be disregarded by DWP so that amount would not loose your present Pension Credit.
Check with DWP as the disregarded amount may well be a lot higher nowadays.
Gareth Morgan says
You need to be cautious about this. There is a big difference between taking in a lodger or sub-tenant, when you are living in the house, and renting out the house when you are not living there.
Sim says
Spot on Gareth! Taking a lodger and still going away would not be wise! Should have made that clearer!
Sim says
Sorry £23 is wrong. The disregarded amount still remains at £20 where it seems to have been stuck for decades.
Means tested benefits – the first £20 each week in rent will not be counted as income. Provide some meals to your lodger, then only half of what they pay you each week over £20 will be counted as income.
Council benefits – Similar rules for what is counted as income may apply so check with your council !
Sim says
Gave online pension credit calculator dwp.gov.uk this simple test
man england born 10/10/1942 with 15000 outstanding mortgage, state pension 168/week, 4500 in bank account, 1 lodger pays £43/week
Result = you could get a pension credit of £11.40/week and SMI loan £7.53/week
to find out exactly phone Pension Credit claim line Telephone: 0800 99 1234
so would seem small lodger income did not remove pension credit entitlement.
easy to test this calculator out yourself or bite the bullett and phone ’em!
Catherine says
Hello everyone,Just wanted to point out that I accepted the loan offer thinking as I was led to believe it would continue to pay SMI at same rate,but Oooo Nooo….
June payment was £44.04 (as usual)
July payment £ 9.12
August “. £ 9.12
After lot of hassle getting to speak to someone,was told it’s because my capital repayment has dropped.
“ Really “ Oh yes I have managed to pay an extra £80 since June.But still don’t understand the big SMI drop.
So I have now got myself this paultry loan of £9.12 per month is it worth it ?
I am considering cancelling the loan, can you tell me how please ?
Sara (Debt Camel) says
Can you tell me how big your remaining mortgage is? How many years until it ends?
Sim says
The drop in interest only mortgage from monthly interest of 44.04 to 9.12 equates with your having paid extra amounts above the SMI to clear more than 3/4 of the outstanding capital since DWP last assessed the SMI.
That assessment may be from several years ago and 44.04 is way out of date. 9.12 would equate very roughly to £5000 outstanding on mortgage so if the outstanding capital is a lot more than that, ask DWP why 9.12.
If around £5000 is correct you are lucky and may well be able to manage without the SMI loan.
Catherine Wenbourne says
Yes it is just below £5000 with 2years left.
Sim says
Sounds like you’re very savvy and on track to zero by then!
Sharyn smith says
I am getting SMI…..currently being paid at the standard rate. I am switching my mortgage to a fixed 3 year rate at 2.29% I need to know if the SMI load will honour this.
Sara (Debt Camel) says
Is this new fix with the same lender or are you remortgaging with a different lender/
Sharyn smith says
Ty so much for your reply.
It’s with the same lender……
Sara (Debt Camel) says
The rate your SMI is paid at is 2.61% at the moment – you can check to see if it ever changes here: https://www.gov.uk/support-for-mortgage-interest/what-youll-get.
This is a fixed rate, it isn’t linked to the interest rate you are paying. As your SMI is being paid to the same lender (that was why I asked you if you had changed lenders) there shouldn’t be any need to tell the DPW that your mortgage rate has changed.
Sharyn smith says
Thank you so much for your reply.
That’s great to hear……
TONY TOWNSEND says
Dear Sara,
My recollection of the SMI rate paid, is that it is based on the average of fifteen High Street Lenders Mortgage Rates, – I was told by DWP back in 2010 to contact a department of The Bank of England to discover how the rate was set. As rates rise SMI should also eventually be increased.
Under Chancellor George Osborne SMI rate was reduced from 6.08% to 3.63% on 01/10/10.
Regards,
Tony T.
Tim phillips says
What happens if it is a joint morgage but ,we separated 10 years ago but however I can’t come off the morgage as I’m the only security on the house and I can’t force the sale of the house until the kids come out of full time education.
My ex has signed for this loan but I haven’t agreed or signed for this, so how will this work because surely it can’t effect my half of the equity?
Swill26 says
People on benefits with a mortgage are ALL prisoners as UNABLE to switch to cheaper rate and deals or switch mortgage providers. People who need it the most are being denied the cheaper rates and deals. How unfair and sad.
Please read more on article on moneysavingexpert.com below.
https://www.moneysavingexpert.com/news/2018/10/martin-lewis-mortgage-conservative-party-conference/
Swill26 says
Is that possible to switch rates or mortgage provider whilst on SMI?
Sara (Debt Camel) says
You should be able to remortgage with the same mortgage provider but it’s not likely any other lender would offer you a mortgage.
Swill26 says
Yes I did ask my existing lender several times, but they informed me that they are no longer offering any other products, just managing existing loans. I’ve been stuck paying the base rate for years, and now increased rate.
Could any mortgage specialist/brokers offer help being on SMI?
Sara (Debt Camel) says
I would say that is extremely unlikely
Sim says
In the opening explanation, you say of SMI “In June 2017 it was reduced to only 2.61%.”
Checking this government link
https://www.gov.uk/support-for-mortgage-interest/what-youll-get
It seems to still be 2.61% despite the quarter percent hike by the Bank of England.
It means most of those who opted for the SMI loan, now face a small shortfall they
must pay separately themselves to avoid going into arrears.
Even the modest Nationwide variable mortgage at 2.75% will not be fully covered!
The SMI loan scheme is not doing what it says on the tin and this will worsen if
hikes in bank rates continue to be ignored!
Sara (Debt Camel) says
The rate at which SMI s payable is set in relation to the average interest rate on new mortgages. It only changes when the average rate moves by more than 0.5%.
These rules have not changed when SMI was switched to a loan.
Laurel Ellis says
Dont understand the latest post on the subject of SMI.
Pension Credit is not affected by housing costs? If you dontt ake up the loan, you no linger get anything towards your mortgage interest but it doesnt affect your pension credit amount?
Sara (Debt Camel) says
Hi Laurel,
do you have a benefit / SMI problem? If you don’t I would suggest not worrying about what some other people have posted as their situations may not be the same as yours.
Neil Alborn says
Got my first annual statement from the SMI loan and it’s £2013.05 I dread to think wot it will be in 21years time when my mortgage is finished.
The interest is £2.14 but will go up considerably as my loan gets bigger.
All these years I’ve tried to keep myself debt free other than the mortgage and now I see this spiraling out of control.
From being a carpenter for 14years who paid my mortgage with ease and hoping to leave my house some day to my kids to being disabled not able to work with these debts stacking up and what equity I had in the house will be swallowed up. 😪
deni case says
Is that interest on top of the bank interest or inclusive? What is the bank rate that you are paying pm? I am dreading having to apply very very soon as my fixed rate runs out in July and I will have to renew or go onto the bank’s SV rate which will be much higher.
S William says
I feel the same pain, it’s very unfair to be put in this compromising situation.
I wish changes to make a benefit into SMI loan are reversed back soon as it unfairly targeted vulnerable people.
Annie says
I took out smi loan last May received letter from council tax benefit dept Feb 2019 inform me now on contribution based esa (support group) then
received letter from Dwp inform me was going on contribution based from April 2019 rang they informed me due to taking out smi loan previous year (2018) I was now on contribution based and together with my part time occupational pension (received early due to accident not eligible to oap pension until 2023) I now have a bigger amount of esa money than my pension so do not qualify for income related esa am at a loss why taking out smi loan resulted being moved to contribution base. I have been entitled to income related 10pence a week for number of years (before was moved from incapacity benefit to esa) this entitled me to council tax, dental and optician. They took housing benefit off my esa previous to moving to smi and paid it direct tomortgage company leaving me with £77 a week so they never really gave me anything other than the 10 pence which as previously said resulted in me not paying council tax etc. I spoke to dwp and council tax benefit to explain I still have a top up of 10p showing on the letter which gives breakdown of my benefit both say I am on contribution based not entitled to anything else, the council have now issued me with a bill for council tax 2018 – 2019 asked why did not contact me sooner answer was that they do not review benefits until February and they were not informed by dwp before.
Sara (Debt Camel) says
Hi Annie, I suggest you go to your local citizens Advice and they will try to resolve this for you.
Annie says
Thanks Sarah for your advise I’m sure there must be lots of people who live on their own in same situation as me
TONY TOWNSEND says
Dear Sarah,
Is Annie’s Council treating SMI Loan as Income?
I know there is a no earnings rule – if you earn a penny SMI Loan is withdrawn…
Sara (Debt Camel) says
that can’t be the problem – the SMI hasn’t been withdrawn. and the problem sounds to be with the DWP not her council.