Many people in the UK associate Housing Benefit with renters, as it is primarily designed to help people on a low income pay for their rent.
However, the situation for homeowners who are struggling to cover their mortgage payments is different and often causes confusion.
It is very important for homeowners on benefits to understand the specific rules that apply to their situation.
A common misconception is that Housing Benefit itself can be used to help with a mortgage. This is generally not the case.
The government provides a separate form of assistance for homeowners on benefits, which is called Support for Mortgage Interest, or SMI.
For almost all working age people, new claims for Housing Benefit were replaced by the housing cost element of Universal Credit.
Neither Housing Benefit nor the housing cost element of Universal Credit provides money to cover the capital and interest repayments of a standard mortgage.
The limited exceptions where Housing Benefit may still be claimed for rent, such as being of State Pension age or living in supported, sheltered, or temporary accommodation, still do not cover mortgage payments.
Homeowners must look at the specific government loan scheme designed for them.
Can I claim Housing Benefit if I own my home and have a mortgage?
In most cases, the simple answer is no. Housing Benefit is a local council benefit designed to help with rental costs, not mortgage payments.
If you are a homeowner, you cannot usually claim Housing Benefit for your mortgage.
However, you may be able to get a different type of support from the government, which is specifically aimed at homeowners who receive certain qualifying benefits and are finding it hard to meet their mortgage interest payments.
This support is known as Support for Mortgage Interest, or SMI.
What is the Support for Mortgage Interest scheme?
Support for Mortgage Interest, or SMI, is a government loan that is designed to help you pay the interest on your mortgage or on an eligible loan for certain home improvements.
It is important to know that SMI is a loan and not a benefit payment.
This means that the amount paid to your lender must be repaid to the Department for Work and Pensions when the property is sold or transferred to a new owner.
The loan is paid directly to your mortgage lender and is calculated using a standard interest rate set by the government, which may be different from your lender’s rate.
Which benefits make me eligible to claim Support for Mortgage Interest?
To be eligible for an SMI loan, you must be a homeowner who has a mortgage or an eligible home improvement loan on the property you live in, and you must also be receiving one of the following qualifying income related benefits:
- Universal Credit
- Income Support
- Income based Jobseeker’s Allowance, or JSA
- Income related Employment and Support Allowance, or ESA
- Pension Credit
If you are only getting New Style Jobseeker’s Allowance or New Style Employment and Support Allowance, you will not qualify for an SMI loan, as these are non means tested benefits.
Is there a waiting period before I can receive an SMI loan?
Yes, there is a waiting period, and the length depends on the qualifying benefit you are receiving.
If you are claiming Universal Credit, you can start getting the SMI loan after you have been entitled to Universal Credit payments for three consecutive months.
If you are claiming Income Support, income based JSA, or income related ESA, the waiting period is much longer, usually 39 consecutive weeks, which is around nine months.
There is no waiting period if you are claiming Pension Credit; the SMI loan can start immediately.
Is there a limit on the amount of mortgage interest the SMI loan will cover?
Yes, the SMI loan has a limit on the amount of mortgage capital it can cover the interest for.
If you receive Universal Credit or one of the legacy benefits, the loan will help pay the interest on up to £200,000 of your mortgage or loan.
However, if you receive Pension Credit, the maximum capital amount the loan will cover the interest on is £100,000.
If your mortgage or loan is for a higher amount than these limits, the SMI loan will only cover the interest up to the relevant cap.
How do I apply for the Support for Mortgage Interest loan?
The application process for an SMI loan is linked to your main benefit claim.
When you apply for a qualifying benefit, you are usually asked extra questions about your housing costs to check if you are eligible for SMI.
If you are already receiving a qualifying benefit, you should contact the relevant office that pays your benefit, such as the Pension Service or the Universal Credit helpline, to request the application forms.
- You will be asked to find out details about your mortgage and loan amounts.
- Your lender will need to complete and sign part of the form.
- If you have a partner, they will also need to agree to and sign the loan agreement.
Does the SMI loan have to be repaid and how is it secured?
Yes, the Support for Mortgage Interest is a loan that is secured against your property by the Department for Work and Pensions.
This means that the full amount of the loan, including all of the compound interest that has been added over time, must be paid back.
Repayment is typically required when the property is sold, or when ownership of the property is transferred.
You do not have to make monthly repayments on the loan while you are receiving it, but you can choose to make voluntary repayments at any time to reduce the overall amount owed.
