Support for Mortgage Interest: help with your mortgage — but it is a loan

Support for Mortgage Interest (SMI) helps homeowners on certain benefits pay the interest on their mortgage. It is important to understand what it is: a loan, not a gift.

How does it work?

SMI covers the interest on your mortgage (not the capital or arrears), and the money goes directly to your lender. It is a loan that must be repaid with interest when you sell or transfer ownership of your home; if you buy a new home you may be able to transfer it. The interest rate on an SMI loan is currently 3.66% a year (it can change).

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Who qualifies and how much?

Getting a qualifying benefit makes you eligible: Universal Credit, Pension Credit or income-related ESA. On Universal Credit, payments usually begin after 3 months of continuously receiving it; on Pension Credit, from the start. Interest is calculated on mortgage capital of up to £200,000 (or up to £100,000 for Pension Credit recipients, or if you started a qualifying benefit before January 2009).

How do you apply and what to remember?

You arrange SMI through the office that pays your benefit (for Universal Credit, via your online journal). Because it is a loan secured as a charge on your home, weigh it up: it reduces what you will get on a future sale. But for many it is a way to keep the home and avoid building up arrears. SMI does not cover insurance or existing missed payments. Detailed rules are on GOV.UK; if you are struggling with your mortgage, also talk to your lender and get free debt advice.

How does SMI differ from an ordinary benefit?

The key difference is that it is a loan, not a payment you keep. The money goes directly to your lender and covers only the interest, not the capital or arrears. The loan must be repaid with interest when you sell or transfer the home; it is registered as a charge on your property. So SMI should be treated as a considered financial decision.

Who does it still suit?

For many, SMI is a way to keep the home through a hard period and avoid building up mortgage arrears, which can lead to losing the property. At 3.66% a year the loan is usually cheaper than mounting penalties and the consequences of default. Before deciding, talk to your lender about any forbearance, check your entitlement to other benefits, and get free debt advice (for example from StepChange or Citizens Advice) to choose the best option for you.