Can SMI be paid be to the claimant instead of the mortgage provider?

Changes in help with mortgage interest in the benefit system

The Department for Work and Pensions (DWP) currently offers Support for Mortgage Interest (SMI) or Help with Housing Costs. This is not to be confused with Housing benefit or help with rental costs in Universal Credit.

SMI pays towards the interest on a mortgage and other eligible home improvement loans. It is paid direct to the mortgage lender and is only available with claims for these benefits:

• Income Support
• Income-Based Jobseeker's Allowance
• Income-Related Employment and Support Allowance
• Universal Credit
• Pension Credit.

From 6 April 2018

From 6 April 2018 this support will become a repayable loan. It will be an interest-bearing loan, secured by a second charge on the home, and it will be repayable if the property is sold or its ownership transferred.

The way that SMI is worked out and what mortgages and secured loans are eligible remains the same as under the previous scheme.

This change applies to all claims including benefits paid to pensioners. The current SMI scheme ends completely on 5 April 2018.

People receiving the current SMI will be contacted by a company called SERCO, who are managing the scheme for the government.

SERCO should write to and make a telephone call to everyone affected by the change, and should provide an information booklet explaining the scheme. Only factual information will be provided and no advice will be given by them.

What happens when you get a phone call

You will be rung by SERCO between five and 15 working days after you have received the information booklet. This is to give you time to read the details and think about any questions you may have.

If you have a partner, both you and your partner must receive the phone call in order to be offered the SMI loan. This is to ensure that you both understand the terms of the SMI loan.

You can book a specific time for the call if this helps you. You can also have someone with you during the call - for example, a relative or carer.

If you wish to accept the SMI loan, you can do so during the phone call or you can contact DWP afterwards.

You will then be sent loan documents for you (and your partner if you have one) to sign and return. DWP will confirm receipt of these documents in writing. You will also get a letter confirming when SMI loan payments will start.

In most circumstances, the SMI loan payments will go straight to your mortgage lender

You will receive an annual statement of your SMI loan and interest.

Your benefit payments

Your benefit payments will carry on, but you will need to decide whether to accept a loan.

You do not have to accept a loan, but if you do not accept one, your SMI payments will stop.

If you wish to accept a loan you will need to complete and return loan documents.

If you do not wish to accept a loan payment, ask for a benefit check from welfare rights to make sure that there is no effect upon any of your other entitlements. In a very few cases, where only a small amount of benefit is payable in the first place, people may lose entitlement to full help with health costs if they no longer get SMI.

Cost to set up an SMI loan

There will be no administration fees to get SMI loan payments.

However, if you seek your own legal or financial advice, or help and support to understand and complete the loan documents, you will have to meet your own costs.

DWP and SERCO will provide information about organisations that can offer free help and support.

Mortgage protection policy

A mortgage protection policy will affect how much you receive. SMI payments are reduced by the amount of mortgage protection payments you get.

The equity left in your home when you sell it

SMI payments will be made no matter how much or little equity there is in your property, and your property will not be valued for this scheme.

You must pay as much of the loan (plus interest) back as possible from the proceeds of sale, after your primary mortgage and any other charges have been paid off - but any amount of loan still owing will be written off if there is insufficient equity in the property.

Paying back the loan early

You can pay back the loan early, but this is entirely voluntary. There will be no early repayment fees.

Opting out of loan payments

You can opt out of loan payments at any time. But you will have to repay any outstanding loan amount, plus interest, from available equity in your property when it is sold or ownership is transferred.

If you want to stop your SMI loan payments you will need to make sure you can pay the interest on the mortgage yourself.

Accepting the offer of an SMI loan at a later date

You can accept the offer of an SMI loan at any time, as long as you still receive one of the relevant benefits.

If you have an appointee or someone holds power of attorney

The person who is your appointee or who holds power of attorney will be contacted rather than you being contacted direct. 

When you'll be contacted

You are likely to be contacted early July 2017 onwards - if you are on Pension Credit.

If you receive Employment and Support Allowance, you may be contacted from October 2017 onwards.

If you receive Income Support or Jobseeker's Allowance, you may be contacted from January or February 2018.

* Information from Derbyshire County Council

Please get in touch with the helpline if you need further advice.

Best wishes

Debbie