The government offers assistance in satisfying payments if you have a low income. In this guide, you will find support concerning mortgage interest loan. You should also be able to understand how it affects your debt payments after reading this guide.
Financial Help During COVID-19 Pandemic
Several measures are considered to assist individuals who are coping with the effects of COVID-19 or Coronavirus Pandemic to their finances. These include payment breaks on mortgage and payment holidays for some unsecured debts and moratorium extension for residents in Scotland.
You may also read our guide: Financial Help Available During Coronavirus Pandemic and Payments for Car Loans and Finance During Coronavirus Outbreak.
SMI or Support for Mortgage Interest Payments
SMI can assist with your mortgage interest payments. As of April 2018 onwards, SMI is in the form of a loan protected against your assets.
To be qualified for SMI you must be getting at least one of these benefits:
- Income support
- Pension Credit
- Income-based jobseekers allowance or JSA
- ESA or Income-related employment and support allowance
If you’re receiving universal credit, the home component for homeowners operates in the same process as SMI.
Moreover, SMI is directly compensated to your lender. After 39 weeks that you’ve claimed your SMI, payments will start. This implies that if you can’t afford payments within 39 weeks, your mortgage arrears will pile up.
You may have to repair such arrears at a later time; otherwise, it will affect your credit file.
If you’re benefiting from Pension Credit the SMI payments will immediately commence. The capital of your mortgage is excluded from the SMI payments. This means it will only pay the mortgage interest.
Furthermore, you can request your lender to modify your arrangement into interest-only payments within the SMI period.
Visit Gov.uk to know more about the process of SMI and how it works.
Support Mortgage Interest Loans and Benefits
All current support for mortgage interest benefit applications closed as of 5 April 2018. Hence, anyone receiving SMI benefit as of the moment has been granted an elective SMI loan alternatively.
Qualified individuals getting SMI benefit have been informed by the DWP (Department for Work and Pensions) that it has ended 2018th of April and is succeeded by the loan scheme. However, these loans will not be instantaneously granted. You have to sign an agreement so you can be eligible. If you fail to sign up. your lender can instantly cease your mortgage.
If you have some inquiries regarding the new SMI loan, get in touch with Serco on 0800 046 8333.
How the SMI loan influence my debt payments?
If you’re on a DMP (debt management plan) or TTP (token payment plan), SMI won’t affect your plan. This is when your SMI is paid as a loan and not as a benefit.
Additionally, if you’re on an IVA or Trust Deed, we suggest you review your circumstances with IVA specialist or insolvency practitioner.
Moreover, the SMI loan is considered as a secured debt one you declare for bankruptcy. This makes it repayable once you’re bankruptcy application progresses.
If the insolvency trustee markets your home, they would use the proceeds to compensate DWP balance.
Once you sign the SMI agreement:
- The amount of loan secured against your property will grow each month, resulting to decrease equity
- The payments for SMI loan will remain at the same value as usual
- Payments made from the 6th of April 2018, are through DWP loan and Pension Credit that are secured with your assets.
- There’s no need to repay \the loan unless your house has been sold
- When equity is not adequate to compensate the full amount upon selling the house, the remaining will be written off
- The charges in terms of interest rate on the loan are cheaper than business secured lending. In fact, the law implies that the rate will remain low throughout the period.
On the contrary, if you don’t sign the SMI agreement:
- The payments for SMI loan ended on 5 April 2018
- The mortgage lender is possible to follow up when they recognise the payment have halted
- Except you can meet the mortgage interest each month from extra income, your lender is anticipated to commence a court action for repossession
- If your lender starts legal actions against you, unwillingness to sign the SMI loan agreement is prone to make your condition more serious. This makes it more apparent that the court will award ownership to the lender.
To determine if you are eligible for this scheme and get aid in applying, do not hesitate to contact us. You can also use our free online advice tool. We have debt specialists who can guide and answer your inquiries. Give us a call and will show you how you can manage your circumstances better.