DWP change means thousands on Universal Credit can apply for £1,000 extra mortgage bill help
THOUSANDS of households on Universal Credit can get up to £1,000 in mortgage bill support.
The Department for Work and Pensions’ (DWP) Support for Mortgage Interest (SMI) gives struggling people on Universal Credit and other benefits a loan to help pay their mortgage.
The money is only repaid if you sell your home or die.
If you’re on Universal Credit, it helps you pay the interest on home loans of up to £200,000, whereas on pension credit it’s on mortgages of up to £100,000.
The support is there to help stop people from defaulting on their mortgage while they are on benefits.
The recent DWP change means households can borrow up to £1,000 more than they could previously.
At the same time, the government has reduced the repayment rate from 4.5% to 3.9%.
Currently, over 200,000 households receiving Universal Credit have mortgages.
However, only 1.1%, or around 12,306, have applied for SMI, according to Policy in Practice.
To qualify, you must have been receiving Universal Credit for at least three months.
It’s important to note that SMI is not a grant but a loan.
This means interest will accrue, although you will only need to repay the loan when you sell or transfer ownership of your home.
However, the interest charged is generally quite low.
If you sell or transfer ownership, the interest you pay on your loan is now 3.9% – down from 4.5%.
This rate is still 1.47% lower than the average two-year mortgage interest rate, which currently stands at 5.37%, according to moneyfactscompare.co.uk.
If you are struggling to pay your mortgage, your first step should be to contact your lender as soon as you anticipate any difficulties with your monthly repayments.
By doing so, they might direct you to support options that have fewer strings attached.
This will allow you to assess whether opting for SMI is beneficial in your situation.
What is SMI and who’s eligible?
Support for mortgage interest or SMI helps those on Universal Credit – and other benefits – by giving them a low-interest loan.
The help goes towards mortgage payments or loans taken out to help repair any damage to the home.
SMI is a loan that you will need to repay with interest when you sell your home.
You’ll get help paying the interest on up to £200,000 of your loan or mortgage.
But you’ll only get up to £100,000 if you get pension credit.
The interest added to the loan can go up or down, but the rate will not change more than twice yearly – the current rate is 3.9%.
To be eligible for a Support for Mortgage Interest (SMI) loan, you need to be getting one of the following qualifying benefits:
- Income support
- income-based jobseeker’s allowance (JSA)
- Income-related employment and support allowance (ESA)
- Universal Credit
- Pension credit
You can start getting the loan:
- From the date you start getting Pension Credit
- After you’ve claimed Income Support, income-based JSA or income-based ESA for 39 weeks in a row
- After you’ve got Universal Credit for 3 months in a row or you moved to Universal Credit within a month of another benefit ending and you’ve spent 3 months in total getting these benefits
How do I apply for SMI?
Contact the office that pays your benefit to find out if you could get an SMI loan.
If you get or have applied for income support, income-based JSA or income-related ESA, contact Jobcentre Plus.
You can do this by calling 0800 169 0310.
If you get or have applied for pension credit, contact the Pension Service by calling 0800 731 0469.
If you get or have applied for Universal Credit, you can either:
- Add a message to your journal on your Universal Credit account
- Contact the Universal Credit helpline on 0800 328 5644
What other mortgage help can I get?
AS soon as you think you will have a problem with your monthly mortgage repayment - whether you can't pay anything, can't pay all of your monthly payments, or can't pay it on time - get in touch with your lender immediately.
They have certain schemes in place to help you if you’re struggling.
Under the government’s Mortgage Charter, you can temporarily ask to switch your mortgage to interest-only, or extend your term to bring monthly payments down.
You won’t have to submit any further income details or share monthly spending commitments – you can just ask your lender to make the switch.
And it won’t affect your credit score for six months if you choose to take up the offer.
If anyone using the temporary measures decides to return to their original plan within six months, they are free to do so.
Ask your lender about the breathing space scheme if you find payments unaffordable.
Under the breathing space scheme, no debts will earn interest, and no fees will be added for 60 days.
You’ll be protected from debt collectors and bailiffs.
You may also be able to apply for a payment holiday – this is when you don’t need to pay anything.
However, interest and charges may continue to be added, and missed payments will need to be made in the future.
Every company has a different policy, so you’ll need to get in touch to find out what support is available to you.
Many local councils have Welfare Assistance schemes to help struggling families.
Help available varies, but you could get free cash, food vouchers, and help for bills like rent and energy.
Check with your council to see whether you are eligible and what you can claim.
And, of course, it’s always worth checking that you’re entitled to all the benefits available.
Entitledto’s free calculator works out whether you qualify for various benefits, tax credits and Universal Credit.
Debt charity StepChange also has a benefits checker which is free to use and won’t record your results.