Support for Mortgage Interest (SMI) explained

Support for Mortgage Interest (SMI) is a government loan scheme that helps homeowners on certain benefits pay the interest on their mortgage and some other home loans¹. It is not a benefit and it is not free money: it is a loan secured against your property that you repay, with interest, when you sell your home or transfer ownership to someone else².

The scheme exists to prevent low-income homeowners from losing their homes, through contributions towards their mortgage interest payments³. It only pays interest, not the capital you borrowed, and only on the first £200,000 of your mortgage⁴. The rate used to work out how much you get is 3.66%⁵.

If you are a homeowner receiving Universal Credit, Pension Credit, Income Support, income-based Jobseeker's Allowance or income-related Employment and Support Allowance, you may be eligible⁶. The waiting period depends on which benefit you receive, and the money is usually paid straight to your lender rather than to you⁷.

SMI is a loan, not a benefit

Before 6 April 2018, SMI was a benefit that did not need to be paid back. From that date it was replaced with a loan, called a Loan for Mortgage Interest⁹. That change matters more than any other fact on this page: what you receive now has to be repaid, with interest, and it is secured on your home.

The scheme is described in official guidance as a government loan scheme helping with the interest costs of mortgages and certain home loans¹. Independent guidance is blunter: SMI is a loan not a benefit and must be repaid². The loan is secured against your property⁸, and where it needs to be secured, the Department places a charge, or in some cases a mortgage, over your property⁷.

Because it is a loan, it is not counted as income in the way a benefit would be, and there is no credit check and no fee to set it up⁶. But it is also not a grant, and it does not disappear. The Department for Work and Pensions describes payments as a loan from the Department⁸, and you have to pay interest on the amount of loan help provided¹¹.

The policy was introduced to prevent low-income homeowners from losing their homes, through contributions towards their mortgage interest payments³. That is the purpose: keeping you in your home while you are on a low income, in exchange for a claim on the property later.

Who can get SMI: homeowners on qualifying income-related benefits

You may be eligible for SMI if you are a homeowner and you get one of the qualifying income-related benefits⁶. Those benefits are Universal Credit, Pension Credit, Income Support, income-based Jobseeker's Allowance and income-related Employment and Support Allowance¹². A member of the household must be in receipt of, or treated as receiving, one of the qualifying benefits¹³.

The scheme covers homeowners, including leasehold properties for some service charges, and shared ownership properties alongside help with rent¹⁴. If you live in a shared ownership property, you could get SMI as well as help with your rent¹⁴, and any mortgage in shared ownership cases is subject to SMI rules¹⁵.

Self-employed claimants who report a loss of earnings qualify for SMI¹⁶. In a joint claim where both people are self-employed, either one reporting a profit loses entitlement for that assessment period¹⁶.

The waiting period depends on your benefit

Working-age claimants must receive Universal Credit for a three-month qualifying period before they qualify for SMI¹. The qualifying period is three assessment periods of Universal Credit continuously, except where a claimant receives a nil award for any reason, in which case the qualifying period starts again¹⁸. Before 3 April 2023 this was nine assessment periods¹⁰, and the change was announced in the November 2022 Autumn Statement¹⁹.

There are situations where SMI restarts straight away rather than after a fresh wait: if you stopped getting Universal Credit but started getting it again within six months, if you moved from Pension Credit to Universal Credit, if income-related Employment and Support Allowance was followed by a Universal Credit claim within a month, or if you applied for Universal Credit within three months of a Migration Notice letter⁶.

What SMI pays for: interest on a mortgage or eligible home loan

SMI provides Universal Credit claimants with help towards interest payments on their mortgage and loans for certain repairs and improvements to their home¹⁸. It can help towards mortgage interest payments for a mortgage, a loan to buy, or a loan to improve your home⁷.

The list of eligible loans is wider than many people expect. It could help with the cost of interest on a mortgage or remortgage, a loan taken out to pay a service charge for essential repairs or improvements, or a loan taken out to pay for certain essential repairs or improvements directly²¹. You may also be able to get payments towards the interest on loans you took out for essential repairs or improvements to your home, or buying your ex-partner's share in your home if you have separated².

If you are on Universal Credit, you can also get a Support for Mortgage Interest Loan for help with interest payments on other loans that are secured on the home you occupy or treated as occupying, whatever the purpose of the loan¹¹. That is a broader cover than the repairs and improvements list alone.

If you are on Universal Credit or Guarantee Pension Credit, you can also get a Support for Mortgage Interest Loan to help with payments made under alternative finance arrangements, for example an Islamic mortgage, to acquire an interest in your home¹¹. Our page on home purchase plans explains how those arrangements work.

Where SMI does not help: capital, insurance and arrears

SMI can only help you to pay the interest on your mortgage. It generally cannot be used to pay off the amount you borrowed, the capital². It may not pay all of your interest and it will not pay towards capital repayments²³.

It cannot help you pay the amount borrowed, insurance policies or mortgage arrears⁶. SMI is meant to help with interest payments, not arrears⁹. If you have already fallen behind, an SMI loan does not clear that debt.

That leaves a gap a reader should understand clearly. On a repayment mortgage, your monthly payment is part interest and part capital. SMI covers only the interest side, and only up to the £200,000 limit, so it will not usually cover your whole mortgage payment. You remain responsible for the rest.

How SMI is paid: usually straight to your lender

SMI is usually paid directly to your lender⁷. Payments are generally made directly to lenders¹, and the payment is usually made direct to the lender²⁴. There is no lump sum, no credit check and no fees to set up⁶.

If your lender is not on the Qualifying Lenders Register, the payment is made to you instead¹⁶. Otherwise, you do not receive the money yourself and you cannot choose to take it as cash.

The timing differs by benefit. If you are on Pension Credit, or you have reached Pension Credit qualifying age, payment to your lender should happen straight away. If you are getting Universal Credit or other working age benefits, you will usually have to wait until you have been receiving them for three months in a row²⁵.

How to apply

If you claim Universal Credit, you can use your online account to ask to apply for SMI when you make a claim, or at any time during your claim⁷. There is no separate application form to chase down for Universal Credit claimants.

The SMI rate: 3.66%

The rate used to calculate how much support you get is 3.66%⁵. A standard interest rate, based on the average mortgage rate published by the Bank of England, is used to calculate the amount¹⁸.

The rate is not fixed forever. It is set for six-month periods at the average gilt rate published by the Office for Budget Responsibility¹. That means the amount you receive can move even if your circumstances do not.

Rates have changed over the life of the scheme. In July 2023 the standard interest rate was 2.65%, based on the average mortgage rate published in Bank of England statistics¹. In April 2023 the rate used by the government to calculate the amount of SMI was 2.09%¹⁴. The current rate of 3.66% is higher than both, which means the loan balance grows faster than it would have at those earlier rates.

Repaying an SMI loan

This is called a Support for Mortgage Interest (SMI) loan which you need to repay⁷. You will need to repay your SMI loan as a lump sum with interest if you sell or transfer ownership of your home⁷.

The repayment triggers are specific. SMI loans are repayable with interest when the property is sold, ownership is transferred, when the claimant dies, or on a voluntary basis¹. SMI is only repayable from any available equity when the home is sold, transferred, or the loan holder dies¹⁸. You only need to repay the SMI loan plus interest if you sell your home or transfer ownership to someone else, and you can repay earlier at any time²⁶.

If you finish paying your mortgage, you will not need to repay your SMI loan unless you sell or transfer ownership of your home⁷. That is an important distinction: paying off your mortgage does not trigger repayment, but selling the property does.

The SMI payments made to your lender and the interest charged are secured on your home²⁶. If there is insufficient money after a sale, you pay what you can and the Department for Work and Pensions writes off the rest²⁶. That is a meaningful protection, and it is worth knowing before you worry about a shortfall.

Keeping your home: how SMI protects against possession

The purpose of the scheme is to help homeowners stay in their home and protect them from possession³. The SMI policy was introduced to prevent low-income homeowners from losing their homes, through contributions towards their mortgage interest payments³.

That protection is real but partial. SMI keeps the interest side of your mortgage moving to your lender while you are on a qualifying benefit, which can stop the arrears growing on that portion. It does not clear arrears you already have, and it does not pay the capital, so your lender may still take action if the rest of the payment is not made.

If you are struggling, your lender must consider your circumstances before starting possession action. Our pages on mortgage arrears and the pre-action rules set out what a lender must do before going to court, and what happens at a repossession hearing explains the process if it gets that far. The rules differ across the UK: repossession in Scotland and repossession in Northern Ireland follow different court processes.

Free, impartial help is available. MoneyHelper provides guidance on benefits and mortgage support²⁷. StepChange offers debt advice⁸, and Shelter and Shelter Cymru provide housing advice². Citizens Advice and Advice NI can help with benefit checks²⁹. If you have a complaint about how a lender has handled your case, the Financial Ombudsman Service can look at it.