Support for mortgage interest

Support for Mortgage Interest (SMI) is a loan from the Department of Work and Pensions (DWP) to help towards the interest on:

• mortgages

• some loans for home repairs and improvements

Prior to 6 April 2018, SMI was paid as part of a claimant’s benefit award.

Obtaining advice before taking a loan

Claimants should be referred for independent financial advice about whether to proceed with the loan. A generalist or debt adviser can provide information on the consequences of accepting or not accepting a loan, but cannot advise on whether the individual applicant should go ahead.

Other options may be available such as:

• contacting the mortgage lender to explore other ways of managing mortgage repayments

• asking a credit union, bank or building society for a loan

Find out where to get debt and money advice.

Find out where to get advice about benefits and grants.

Signing up for an SMI loan

The DWP does not carry out a credit check before granting an SMI loan.

A claimant is required to sign a charge form to secure the SMI loan against their home. If the claimant’s partner is a joint owner they are also required to sign the form.[1] This charge is registered at the Land Registry.

If there are joint owners that are not the claimant’s partner, the claimant is required to sign an equitable charge in respect of their beneficial interest in the home.[2] This charge is not registered at the Land Registry.

A homeowner or their partner can claim SMI for the home which they normally occupy (or are treated as occupying) if they are:[3]

• in receipt of a qualifying benefit

• liable or treated as liable for owner occupier payments

Qualifying benefits

Qualifying benefits for claiming SMI are:[4]

• universal credit

• state pension credit

• legacy benefits

Legacy benefits include income support, income-based jobseeker's allowance (JSA) and income-related employment and support allowance (ESA)

When a claim for a qualifying benefit is made the claimant will be asked questions about their housing costs to find out if they are entitled to an SMI loan.

Universal credit earned income

From 3 April 2023, a universal credit claimant with earned income can qualify for help with interest payments through SMI.[5] Previously a universal credit claimant did not qualify for help with interest payments if they or their partner had any earned income.[6]

The standard qualifying period before an SMI loan can be paid to claimants is:[7]

• three months of entitlement to universal credit

• 39 weeks of entitlement to legacy benefits

Before 3 April 2023, the qualifying period for universal credit claimants was nine months.

There is no qualifying period for state pension credit claimants.

Where a claimant ceases to be entitled, but then becomes entitled again they do not need to re-serve the qualifying period if this is within:

• six months for universal credit[8]

• 52 weeks for legacy benefits[9]

Mixed age couples

A mixed age couple is where one member of a couple has reached the qualifying age for the state pension and the other member has not.

A claimant in a mixed age couple does not need to re-serve the qualifying period for SMI where one member of the couple is a state pension credit claimant receiving SMI payments when a joint claim for universal credit starts.

The qualifying period does also not need to be re-served where one member of the couple previously claimed state pension credit claimant and SMI payments, and where their universal credit entitlement begins within one month of the state pension credit ending.[10]

An SMI loan can only help towards the interest payments on certain loans.

Universal credit claimants

Universal credit claimants can get an SMI loan for interest payments on:[11]

• loans secured on the claimant's home

• alternative finance arrangements (for example, Islamic mortgages) in relation to the claimant's home

Legacy benefit or pension credit claimants

Legacy benefit and state pension credit claimants can get an SMI loan for interest payments on:[12]

• a mortgage to purchase the home the claimant normally lives in

• remortgage to repay a previous loan for the home the claimant normally lives in

• loans for specified repairs or improvements

Loans for specified repairs or improvements include those which are taken to:[13]

• maintain the fitness of the home for human habitation

• provide separate sleeping accommodation for members of the claimants family who are aged ten or over of different sexes.

State pension credit claimants can also get an SMI loan for alternative finance arrangements.

Loans taken after becoming entitled to a qualifying benefit

It is not normally possible for someone to get SMI for a loan taken during a period when the person was:[14]

• entitled to state pension credit or a legacy benefit

• a family member of someone entitled to state pension credit or a legacy benefit

It is possible to get SMI for a loan taken during this period where the claimant or their partner were previously renting accommodation before buying the home and entitled to housing benefit the week before the purchase.

It is also possible to get SMI on a loan taken during this period if the loan was:[15]

• taken out or increased to buy a home better suited to the special needs of a disabled person

• increased to enable the purchase of a new home which would allow a boy and girl aged over ten but under 20 to have separate bedrooms

• was taken out to pay off an earlier loan (although any extra amount will not be covered)

The upper capital limit on which SMI interest payments for a mortgage or loan can be claimed is usually £200,000.[16]

SMI can still be claimed on mortgage or loans above this amount, but payments will only be made up to the capital limit.

The upper capital limit is £100,000 where the claimant either:[17]

• is in receipt of pension credit

• claimed a qualifying benefit before 5 January 2009 while under pension age

The capital limit is £200,000 where a pension credit claimant was:

• already in receipt of SMI while claiming another qualifying benefit

• moved to pension credit within 12 weeks of their previous claim ending

Interest rates

The interest rate used to calculate the amount of SMI payable is linked to the Bank of England published average interest rate for loans to households secured on dwellings.

This rate is applied regardless of the actual interest rate payable on the claimant's mortgage or secured loan.

The current rate is 3.66 percent. The rate is adjusted whenever the published rate and the SMI rate differ by 0.5 percent or more.[18] Check for rate changes on gov.uk.

Non-dependant deductions

An amount may be deducted if there is a non-dependant living with the claimant.[19] This does not apply to universal credit claimants.

A non-dependant is an adult child, friend or relative living with the claimant (but not the claimant's partner, lodger or joint tenant). It is assumed that the non-dependant will make contributions towards the housing costs, whether such contributions are made or not.

Find out more about non-dependant deductions.

An SMI loan is normally paid directly to the lender. It is paid in arrears every month for universal credit or every four weeks for other benefits.[20]

An SMI loan will be paid to the claimant directly when the lender is not part of the mortgage payment scheme agreed with the DWP. Most lenders are part of the scheme.[21]

Duration of the loan

An SMI loan can be paid indefinitely.[22]

Unless the loan agreement is terminated, payment stops if the claimant ceases to:[23]

• be liable (or treated as liable) to make owner occupier payments

• occupy (or be treated as occupying) the accommodation

• comply with the terms of the loan agreement

• be entitled to a qualifying benefit

When a claimant ceases to be entitled to a qualifying benefit after becoming employed and that employment is expected to last for at least five weeks, a further four weeks’ payment will be made.

Any amount outstanding on the SMI loan becomes due if:[24]

• ownership of the property is transferred or assigned

• the claimant dies and there is no partner or other member of the ‘benefit unit’ living in the property

• the property is sold unless the outstanding amount can be transferred to another property

The money is paid from the claimant’s estate. If there is insufficient equity to repay the loan in full, any outstanding amount is written off.

Regular repayments do not have to be made. The loan can be paid be paid back in full or in part at any time. The minimum amount that can be repaid at one time is £100 or the outstanding balance, if less.[25]

Rate of interest

The interest rate for repayment of an SMI loan is linked to the Office for Budget Responsibility’s forecast of gilt rate. The current rate is 3.9 percent. The rates may change on 1 January and 1 July each year.[26] Check for rate changes on gov.uk.

The interest accrues monthly and is calculated as compound interest. This means interest is charged on the unpaid loan and on the interest. An SMI loan continues to accrue interest until it is paid off.

An SMI loan can be transferred to another property without having to repay it when an owner occupier sells their home and purchases another property. 

The owner occupier must inform the DWP that they are selling and request SMI to be transferred, and their conveyancer or solicitor must give a written undertaking.[27]

The conveyancer or solicitor must give a written undertaking to:

• remove the outstanding charge against the property that is being sold

• transfer the outstanding amount to the SMI claimant’s conveyancer or solicitor

• register a new SMI charge for the property that is being purchased

• hold the outstanding amount of the SMI loan until completion

Any reasonable costs incurred by the conveyancer or solicitor in transferring the loan that are covered by the SMI are added to the outstanding amount of the SMI loan, and will accrue interest.[28]

If the outstanding amount of the SMI is more that the equity in the property, the outstanding amount or charge refers to the equity.[29]

DWP Memo ADM 03/21 and Memo DMG 02/21 provide more information about how SMI can be transferred.

Homeowners who wish to transfer SMI to another property should seek independent advice.

A homeowner might be treated as occupying accommodation and continue to receive SMI while they are absent from home.

Universal credit claimants

A universal credit claimant might continue to be treated as occupying accommodation if their absence is due to:[30]

• moving out due to essential repairs

• delays in moving in while adaptations for a disabled person are completed

• fear of violence

• another reason for up to six months

A claimant might also be treated as occupying accommodation if they are liable for payments and before moving in they were in hospital or in a care home.

Find out more about universal credit housing costs element occupation condition.

Legacy benefits or state pension credit claimants

A legacy benefit or state pension credit claimant might continue to be treated as occupying accommodation and continue to receive SMI, including if their absence is due to:[31]

• studying full-time or attending a training course

• moving out due to essential repairs

• delays in moving in while adaptations for a disabled person are completed

A claimant might also be treated as occupying accommodation during other absences up to 13 weeks or 52 weeks in certain circumstances. Find out more about housing benefit during temporary absences from home.

Existing claimants in receipt of SMI benefit should have been written to before February 2018 explaining the change from a benefit to loan.

Claimants should also have been contacted by Serco, on behalf of the Department for Work and Pensions, to explain the changes and to discuss their options.

SMI continued to be paid as a benefit payment to existing claimants up to:[32]

• 7 May 2018 where the DWP has been unable to contact the claimant

• 5 November 2018, or later in limited circumstances where the DWP believes the claimant lacks capacity and the claimant has not accepted or refused the loan