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You’ve had a letter about your Support for Mortgage Interest benefit

This advice applies to Wales

The Department for Work and Pensions (DWP) will write to you if you get Support for Mortgage Interest (SMI) or if you're going to get it in the next 9 months. It’s sometimes called the ‘housing element’ or ‘housing costs payment’.

The letter explains that your SMI payments are changing from 6 April 2018. You'll keep getting your usual payments until then.

From 6 April 2018, you can get the same amount of money to help with your mortgage payments but it'll be a loan instead. You’ll need to pay it back, but only when you sell the home or give it to someone else - for example if you give it to your son or daughter, even if you still live there.

The letter also explains that a company called Serco will call you about your payments. Serco run some of the DWP’s telephone services.

Serco will tell you more about the loan, but you’ll need to decide if it’s best for you.

You won’t have to pay back any help you get with other housing costs like service charges.

If you don’t think you’re getting SMI

SMI is paid directly to your mortgage lender, so it won’t be on your bank statements.

Check the letter that told you how much benefit you’d get. You’ll need to be getting:

  • Universal Credit
  • Pension Credit
  • Income Support
  • income-based Jobseeker’s Allowance (JSA)
  • income-related Employment and Support Allowance (ESA)

You might be getting SMI even if you’re also paying towards your mortgage. This might happen if:

  • your mortgage interest rate is more than the DWP pay
  • you pay more than the interest each month - this might be because you have a repayment mortgage

If you still don't think you're getting SMI, ask the DWP why they’ve sent you the letter - you can find their contact details at the top of the letter telling you about the loan.

If your payments haven’t started yet

If you get Universal Credit, your SMI payments will start 9 months after your first Universal Credit payment starts.

Your SMI payments will start 39 weeks (about 9 months) after your benefit starts if you get:

  • Income Support
  • income-based Jobseeker’s Allowance (JSA)
  • income-related Employment and Support Allowance (ESA)

This means that if you claimed Universal Credit, Income Support, JSA or ESA after 7 July 2017 you won’t get any payments of SMI as a benefit - but you can still get the loan.

If you get Pension Credit, the mortgage payments should have started at the same time as the rest of your Pension Credit.

If you think your payments should have started already, ask the DWP why they haven’t started yet - you can find their contact details at the top of the letter telling you about the loan.

Book a phone call from Serco

You can book a day and time for Serco to call you - their contact details are on the letter they sent you. Serco also need to talk to your partner if you live with them, so choose a time when you’re both free.

If you don’t book a time, Serco will call you 1 to 3 weeks after the date on the letter.

If you can’t use the phone, contact the DWP on the textphone number at the top of the letter and ask how Serco can contact you.

You can ask someone else to help you while you’re on the call - like a friend or a Citizens Advice adviser. They can help you talk to Serco and understand what they're saying, but they can't tell you which option is best for you.

Preparing for the phone call

Think about if you want to use the loan or find another way to pay your mortgage interest. Serco will suggest some options when they call.

Make a note of any questions you want to ask Serco when they call. They can explain how the loan works, but they can’t tell you what’s best for your circumstances.

You don’t have to make a decision during the phone call - you can ask Serco to call back.

You can change your mind even after you’ve told Serco your decision - call Serco and tell them what you want to do.

If you live with your partner

Your partner will need to agree to the loan as well - even if they don't own the home with you. This is because the DWP treat you as a couple for benefits.

It’s usually a good idea for them to agree to the loan, because it means you’re more likely to afford the mortgage interest payments.

You don’t need your partner to agree to the loan if they live somewhere else.

If you own the home with someone else

If you own the home with someone like a friend or family member, they might need to agree to the loan if they live with you. They won't need to agree if they live somewhere else.

If you own the home with someone, the SMI loan might affect what happens when you sell the home or one of you dies - ask your nearest Citizens Advice how the loan might affect you and the other owner.

Deciding what to do

Serco will tell you about different ways to help pay your mortgage interest if you don’t take the loan. For example, they might suggest you could:

  • ask your mortgage lender if you can reduce or stop your mortgage payments
  • get a loan from a bank or other company
  • use an ‘equity release’ scheme - this is when you sell part of your home or get a loan based on what your home is worth
  • borrow money from friends or family

If you’re thinking of borrowing from friends or family, think carefully about what might happen if you can’t pay it back - for example, if they might stop helping you in other ways like childcare.

Check if it will affect your benefits or credit score

There’s no credit check for the SMI loan, and it won’t affect your benefits or credit score.

If you get a loan from somewhere else like a bank or a family member, it might affect your benefits if they give you all the money in one payment. This could happen if your savings after you get the loan are more than:

  • £6,000 - if you get JSA, ESA, Income Support or Universal Credit
  • £10,000 - if you get Pension Credit

When you talk to Serco, they might suggest you could use your savings to pay your mortgage interest. This could affect your benefits, so it’s important to get advice first.

How much the SMI loan will cost

You’ll pay 1.7% interest on the SMI loan - this means you’ll pay back more than you borrowed. The interest rate might go up or down.

Even though you’ll pay interest, it could be cheaper than other ways of borrowing money - like getting a loan from somewhere else or changing your mortgage payments. It could also be cheaper than if a friend or family member gets a loan for you.

You can find out more about comparing how much loans will cost before you decide what to do.

Paying the money back

If you get a loan from somewhere else, you’ll usually need to pay it back sooner than an SMI loan.

You’ll only have to pay back an SMI loan when you sell your home or give it to someone else. If you sell your home, the DWP will take the money for the loan after the mortgage has been paid - this is called a ‘second charge’. You can’t use the money for anything else until the mortgage and SMI loan have been paid.

If your partner lives in the home and inherits it when you die, they won’t have to pay the loan back straight away - it can be paid after they die.

If there isn’t enough money left to pay the DWP back after the mortgage has been paid, the DWP will cancel the rest of the debt.

If you want to pay an SMI loan back early

You can pay back £100 or more of the loan at any time - contact the DWP and tell them you want to pay back some of your SMI loan. You can find their contact details on the letter that told you how much SMI you’d get.

Contact your nearest Citizens Advice first if:

  • you have other debts - it might be better to pay them back first
  • you get JSA, ESA or Income Support and are thinking of using your savings - it might affect your benefits

If you accept the loan

Serco will send you an application form. Contact your nearest Citizens Advice if you don't understand something on the form - an adviser can help you understand it, but they can't tell you what you should write.

Ask the Post Office for proof of postage when you send the form - you might need to prove when you posted it.

If your benefits change

You’ll be entitled to the loan for as long as you get JSA, ESA, Income Support, Pension Credit or Universal Credit.

You'll still get the loan payments if your benefits are sanctioned.

If your benefits change, the DWP will check if your loan payments should change too.

If your benefits stop, you might get 4 weeks of extra loan payments after the benefit ends if:

  • you were getting income-based JSA, Income Support or income-related ESA
  • you’re working more or earning more money

This is known as ‘mortgage interest run-on’.

The extra payments will be paid to your bank account, so you’ll need to pay them to your mortgage lender.

You can check if you can get mortgage interest run-on on GOV.UK.

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