Support for Mortgage Interest (SMI)

In certain circumstances mortgage interest charges, and other housing costs, can be paid through a claimant's benefits. These are called Support for Mortgage Interest (SMI) payments.

Eligible benefits

A claimant will need one of the following SMI eligible benefits to buy a home:

Income Support, which is paid to people who are unable to work or can only work limited hours either because of ill health or caring responsibilities. Claimants are not expected to be available for work.
Income related Employment and Support Allowance, which is replacing Income Support.
Income Based Job Seekers Allowance (IBJSA), which is often known as the 'dole'. Receipt of this is dependent on the claimant being available for work and having income and capital below the beneft eligible levels to qualify for Job seekers Allowance (not income based)
Pensions Credit, which a claimant 60 or over may receive rather than Income Support. They must be receiving the 'guarantee credit' and not just the 'savings credit' to be able to use their benefit to buy a property.

Eligibility

Note: Usually SMI is only payable on mortgages taken out prior to claiming SMI eligible benefits, however there are exceptions to this, particularly if the claimant or someone in their household has a physical or learning impairment.

The main circumstances in which a claimant may be eligible for SMI on loans taken out or increased whilst already receiving SMI eligible benefits are

If the claimant needs to buy a house that is more suited to the needs of a disabled person, than the one in which they currently live
If the claimant need to carry out adaptations for a disabled person
If the claimant needs to carry out certain essential repairs
If the claimant has a boy or girl aged 10 or more and needs to move to a larger home to provide separate bedrooms
If the claimant is in rented accommodation and receiving Housing Benefit immediately before buying their home. In this case the maximum SMI will initially be limited to the amount of housing benefit the claimant is already receiving
If the claimant re-mortgages their home to pay off their original house purchase loan. This could be to obtain a better interest rate or to change the duration of the loan. In this case the amount the claimant is likely to get will be restricted to the original loan amount.

Eligible housing costs

mortgage interest - the interest on a loan taken out to pay for a home, including any taken out to pay for legal fees in connection with house purchase
interest on a loan used to pay for adaptations or certain repairs and improvements to a home, which can be added on top of the basic mortgage interest assistance
service charges like a property management or factoring fee, or a share of common repairs (like repairs to common stairs, roofs, and some shared outside walls).

It is important to remember that only the interest part of a mortgage can be covered by benefits. Capital repayments, buildings insurance, premiums for life or endowment policies or the costs of general maintenance can not be met. A claimant should estimate these costs and check that they will be able to afford them from the rest of their benefit income.

Note: If it is likely that your client will return to work, depending on the number of hours they work and their income, it is probable that they will lose entitlement to qualifying benefits and SMI. Any earnings must therefore be sufficient to cover the ongoing housing costs.