The Department for Work and Pensions (DWP) has reformed its Support for Mortgage Interest (SMI) loan scheme in the wake of heightened financial struggles for homeowners.
Here, we detail what the government's mortgage aid package is, who can qualify and what other methods of support are on hand for those at risk of falling into arrears.
What is the Support for Mortgage Interest loan scheme?
SMI is a government support scheme which helps struggling homeowners cover the cost of some of the interest on their mortgage, or interest costs if you've taken out a loan to make certain home improvements, such as repairs to keep a property habitable or to adapt it for people with disabilities.
The money is paid in the form of a loan, which you'll need to repay - with interest - whenever you come to sell your home, or transfer the ownership to someone else.
You'll usually get help paying the interest on up to £200,000 of your loan or mortgage. The interest rate used by the government to calculate the amount of SMI you’ll get is currently 2.09%.
Who is eligible for SMI?
To be eligible, you usually need to be receiving one of the following benefits:
The following criteria needs to be met in order to qualify for SMI:
undefinedProviding you still meet the qualifying conditions, there is no time limit on how long you can receive SMI for.
Find out more:What are the recent eligibility changes?
Previously, Universal Credit claimants would need to have been unemployed for nine consecutive months before they could access an SMI loan.
However, as of 3 April, that timeline has been reduced to just three months. Anyone who qualifies will automatically be offered the mortgage support.
The government says the change will give 200,000 extra people faster access to the support scheme.
The initiative has also been opened up to Universal Credit claimants who are employed, meaning you can now earn a wage and still qualify for SMI. There was previously a strict zero-earning rule, which resulted in support ending once claimants secured a job.
‘Rule changes can help fend off repossession fears’
The reforms have been welcomed by the Building Societies Association (BSA), which describes the move as a ‘common-sense change from the government’.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: ‘Enabling access to the loan much earlier could well be the difference between a family keeping a roof over their heads or them facing the prospect of their home being repossessed and having to find an alternative, government supported, rental accommodation.’
Find out more:What needs to be paid back?
As the Support for Mortgage Interest scheme comes in the form of a loan, it will eventually need to be paid back by the claimant when they sell or pass the property ownership to someone else.
Just like a normal loan, it attracts interest which compounds over time.
This means those who are supported by the scheme will have to repay the amount the state paid into their mortgage - plus interest.
The current interest rate set by the government is 3.03%. It can go up or down, but it will not change more than twice in a year.
The government says no one will be asked to sell their home in order to repay the loan. If needed, claimants can contact the DWP about transferring the loan to a new home.
How else can you get help with your mortgage?
If you think you won't be able to make your mortgage payment, the first thing to do is contact your lender, as they might be able to offer one of the following options:
A temporary mortgage payment holiday: A temporary switch to interest-only payments:Extending the term of your mortgage:Mortgage support elsewhere in the UK
undefinedsource https://www.which.co.uk/news/article/mortgage-support-rule-change-means-thousands-more-now-qualify-for-help-algzo8U4CWMw