Mortgage help while on benefits

Yes, there are several ways you can get help with mortgage costs if you are on benefits in England and Wales. The main options depend on which benefits you receive and your personal circumstances.

Support for Mortgage Interest (SMI):

This is the main government scheme. It is available if you receive one of the following qualifying benefits: Universal Credit, Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance, or Pension Credit. SMI helps with the interest payments on your mortgage, but not the capital repayment element.

Key points about SMI:

1. Since April 2018, SMI is paid as a loan, not a grant. This means the government places a charge on your property, and the loan must be repaid when the property is sold or ownership is transferred, with interest accruing on the amount paid.

2. There is usually a waiting period before SMI starts. For Universal Credit this is generally nine consecutive assessment periods. For Pension Credit there is no waiting period. For other qualifying benefits the waiting period is 39 weeks, though there are some exceptions.

3. SMI covers interest on loans up to a capital limit, which is currently set at £200,000 for most claimants, or £100,000 for Pension Credit claimants.

4. The interest is calculated using a standard rate set by the DWP, which may not match your actual mortgage rate.

Other practical options to consider:

1. Speak to your mortgage lender as early as possible. Under FCA rules, lenders are required to treat borrowers fairly and consider forbearance options such as a temporary payment holiday, switching to interest-only payments, extending the mortgage term, or agreeing reduced payments. Lenders have specific obligations under MCOB (Mortgages and Home Finance: Conduct of Business sourcebook) to deal sympathetically with borrowers in financial difficulty.

2. Council Tax Reduction is a separate benefit administered by your local council which can reduce your council tax bill, freeing up money for mortgage payments.

3. If you are in serious arrears, your lender must follow a pre-action protocol before seeking possession. This is the Pre-Action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears in Respect of Residential Property. The lender must show it has explored reasonable alternatives before going to court.

4. If you are on a low income, check whether you qualify for other benefits you may not currently be claiming, such as Universal Credit, Pension Credit, or Council Tax Reduction. A benefits check through an organisation like Citizens Advice or Turn2us can identify unclaimed entitlements.

5. If you are already in arrears and facing possession proceedings, the court has discretion under section 36 of the Administration of Justice Act 1970 (as amended by the Administration of Justice Act 1973) to adjourn, stay, or suspend a possession order if you can demonstrate a realistic prospect of paying off the arrears within a reasonable period.

Important things to flag:

The amount of help you receive and the waiting periods depend on which benefit you claim, when your mortgage was taken out, and your individual circumstances. The SMI loan arrangement means you will ultimately owe the government for any payments made on your behalf, so it is important to understand the long-term cost. If your property has limited equity, the implications of the charge should be carefully considered.

If you are already in financial difficulty, acting quickly is important. The sooner you engage with your lender and apply for any available support, the more options you are likely to have.