Mortgage: The state could offer you a loan to cover interest payments – are you eligible?

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MORTGAGE holders may be able to receive state support for some of their costs if they’re also claiming certain state benefits. This additional support will come in the form of a repayable loan.

Mortgage holders may be able to receive separate payments for their housing costs if they’re also claiming Universal Credit. However, state benefit claimants may also be able to receive a loan from the government to help with mortgage interest payments.

Eligible claimants may be able to claim a Support for Mortgage Interest (SMI) loan.

If the loan is awarded, the government will end up paying the interest on up to £200,000 of the claimant’s mortgage (or up to £100,000 if they’re on pension credit.)

This loan can also be used to cover the interest of a loan taken out to cover essential repairs or improvement to the home.

Additionally, it can also be used to buy an ex-partner’s share in the home if separation has occurred.

In order to be eligible for SMI, a claimant must be out of work or of state pension age and also get:

  • Income support
  • Income-based jobseeker’s allowance
  • Income-related employment and support allowance
  • Universal credit
  • Pension credit

Currently, there is a 39-week waiting period from the time a person can claim SMI until the payment is made according to the Money Advice Service.

If a claimant does any paid work during this waiting period the claim will stop and they’ll need to reapply the next time they find themselves out of work.

How long a person can get SMI for will depend on the type of state benefit they’re also receiving.

If the claimant is receiving jobseekers allowance they’ll only be able to get SMI for up to two years.

If the claimant receives any of the other previously mentioned benefits, there is no limit on how long they can claim SMI for.

It should be noted that there are no fees to set up the SMI loan and no credit check will be needed.

Additionally:

  • There will be no need to make regular repayments of the loan (unless the claimant wants to)
  • Interest will be added to the total amount owed until the loan is paid back fully or written off
  • The loan will be secured against the home. If the house is sold or ownership is transferred to someone else, the claimant must pay back the loan out of any equity leftover once the mortgage is repaid

It should be remembered that SMI is a loan and will therefore have interest rate factors associated with it.

The loan will accrue each month and attract compound interest based on the Office of Budget (OBR) responsibility forecast of the ‘gilt rate’ (or the rate of interest on government bonds).

The interest rate on this will fluctuate and as such it could go up or down during the time the claimant has the loan.

The minimum amount that can be repaid at any one time is £100 and DWP will ensure that they receive full repayments.

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