What is it?
SMI is designed to help homeowners who may be struggling to repay their mortgage.
Explaining who is eligible, the Gov.uk site says: “If you’re a homeowner getting certain income-related benefits you might be able to get help towards interest payments on your mortgage and loans you’ve taken out for certain repairs and improvements to your home.”
The help is paid as part of benefits already received and is paid direct to the lender, rather than the homeowner.
It is not used for help on the amount borrowed, only the interest. There is also no guarantee of eligibility for SMI on any loan taken out.
How much is available?
Those who qualify will get help paying the interest on up to £200,000 of their loan or mortgage. If they are getting Pension Credit, this figure is £100,000.
Those already getting SMI who move to Pension Credit within 12 weeks of stopping other benefits, will still get help with interest on up to £200,000.
The standard interest rate used to calculate SMI is 2.61 per cent.
SMI can’t help pay the amount borrowed, only the interest, anything towards insurance policies or missed mortgage payments (arrears).
Who is eligible and how is it paid?
SMI is paid direct to the lender, and payments begin 39 weeks after the recipient claims income support, jobseeker’s allowance, income-related employment and support allowance or universal credit.
However, the government is scrapping this benefit, so those who apply for any of these benefits on or after 7 July 2017 won’t be able to get SMI benefit. They can get an SMI loan instead.
Anyone whose Pension Credit payment begins on or after 6 April 2018 won’t be able to get SMI benefit. They can get an SMI loan instead.
How is SMI changing?
The benefit is being turning into a repayable loan from 5 April 2018, designed to make a saving for the government of £150million a year.
The loan won’t have to be repaid each month, but instead will be due as soon as the homeowner dies, sells their home or transfers ownership of it to a relative or friend.
The exception is if the homeowner dies leaving a husband, wife or civil partner. In that case, the loan only has to be paid back after they die too.
The loan will be charged with an interest set at the ‘forecast gilt rate’, which is currently 1.7 per cent – although it could rise at any point.
The news about SMI changing comes as new measures to help reduce the impact of a looming property disaster were revealed.