People applying for specific benefits from the Department for Work and Pensions may be able to get help with their mortgage. The government runs a little-known program that can offer support to those who are having difficulty with their home loans.
It comes as household bills soar as we all battle the cost of living crisis which has affected gas, electricity, food, petrol, TV/broadband packages and contracts of mobile telephony. And many families facing financial hardship may worry about the mortgage they’re paying to keep a roof over their heads.
Last week’s forecast from the Office for Budget Responsibility showed that the costs of servicing household debt – the interest people pay on their loans, including mortgages and credit cards – are set to rise by 55 billion from £83bn in 2021/22 to £83bn in 2023/24. This equates to an increase in interest payments of £1,000 per household over the two years, based on 27.8 million households in the UK, the Liberal Democrats said.
READ MORE: Universal Credit increases this month, but is still LESS than when the £20 Covid boost was added
Lib Dem leader Sir Ed Davey has slammed Chancellor Rishi Sunak for pushing ahead with a planned tax hike when “people’s homes are at stake”. He said: “Many first-time home buyers who have been saving and saving to get on the housing ladder will urgently need a safety net to get through what looks like months of rising mortgage costs. “We need an emergency mortgage support fund to support struggling families, or we will see people forced to default and give up their house keys.”
What many may not know is that a support fund already exists. So what is it and how does it work?
What is the Mortgage Interest Support Program?
Mortgage Interest Support (SMI) is a program under which homeowners may be able to get assistance with interest payments on their mortgage or any loan they have taken out for repairs and improvements to their property.
SMI does not go towards clearing the amount you have borrowed, it is targeted at interest. It also cannot pay for any insurance policies you have or any missed mortgage payments (arrears).
Plan payments to your lender will be backdated to when you first became eligible.
Who is eligible for the SMI?
To qualify for a Mortgage Interest Support Loan (SMI), you generally must have one of the following five qualifying benefits:
- Income support
- Jobseeker’s Allowance (JSA) based on income
- Income-related Employment and Support Allowance (ESA)
- Universal Credit
- Pension credit
Contact the office that pays your benefit to find out if you are eligible for the SMI. You should be eligible from the date you start receiving pension credit, or after you have received universal credit for nine consecutive months, or after you apply for income support, income-based JSA, or ESA based on income for 39 consecutive weeks. .
But the Lib Dems believe the 39-week waiting period for some ‘may be too long for families in a cost of living crisis’. The party’s proposed emergency mortgage support fund would offer payments instead of loans. Wait times would also be reduced from 39 to 13 weeks, the Lib Dems said.
Anyone benefiting from the universal credit will not be able to benefit from the SMI if they also earn money through a job, if they have benefited from a tax refund or if they benefit from a statutory sickness benefit, a legal maternity allowance, a legal paternity allowance, a legal adoption allowance or a shared legal parental allowance. .
In some cases, when a person has too much income to qualify for one of the eligible benefits, they may be treated as if they were receiving this state support for the purposes of the SMI. The exception to this is Universal Credit where any level of income from employment or self-employment means an individual cannot claim SMI.
How does mortgage interest support work?
You should be aware that the SMI is a loan and you will have to repay it with interest when you sell or transfer ownership of your home – unless you move the loan to another property. Payments usually go directly to the lender.
If you qualify for mortgage interest relief, you usually get help paying interest up to £200,000 on your loan or mortgage. However, you can only get up to £100,000 if:
- you receive a pension credit
- you started claiming another eligible benefit before January 2009 and you were under the statutory retirement age at that time
If you are already on SMI and switch to Pension Credit within 12 weeks of stopping your other benefits, you will still receive support with interest up to £200,000. The interest rate used to calculate the amount of SMI you can get is currently 2.09%.
The interest added to the loan may go up or down, but the rate will not change more than twice a year. The current rate is 0.8%. If you want to repay the loan faster, you can also make voluntary repayments. The minimum voluntary repayment is £100 or the outstanding balance if less than £100.
The Government specifies that you will not be asked to sell your home to repay your SMI loan. If you sell your home later, you pay off the SMI loan from what’s left over after paying off your mortgage, any home improvement loans, and any other loans secured by your property.
If there is not enough left to repay the entire SMI loan, you will be asked to repay what you can. The rest will be written off.
How to register
If you are receiving or have applied for income support, income-based JSA or income-based ESA, contact Jobcentre Plus on 0800 169 0310.
If you get or have applied for Pension Credit, contact the Pensions Service on 0800 731 0469. And if you get or have applied for Universal Credit, contact the Universal Credit Helpline on 0800 328 5644.
Responding to Lib Dems’ criticism of the current MCH scheme, a government spokesman said: ‘We understand that people are struggling with the rising cost of living – we cannot shield everyone from these challenges worldwide, but are taking action worth more than £22 billion this financial year to help.
“We are raising National Insurance thresholds and reducing the Universal Credit sliding scale to help people keep more of what they earn, raising the National Living Wage and providing a £9billion package sterling support for energy bills – and we continue to provide loans to low-income people to help them pay their mortgage interest.
“We are also investing over £12bn in affordable housing to help young people and families get onto the homeownership ladder and our new First Homes scheme will provide homes at a discount of at least 30% to first buyers.”
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