Repaying your mortgage interest on a low income
If you get help towards your mortgage interest payments through a Support for Mortgage Interest (SMI) loan, you’ll need to repay it with interest when you sell or transfer ownership of your property.
Repaying your SMI loan
From 1 July 2024, the Applicable Interest Rate (AIR) is 3.9 per cent. This rate can go up or down but it won’t change more than twice a year and you will be told if it’s going to change.
The Department for Communities will not make a profit from Support for Mortgage Interest loans. The interest you pay will be at a similar rate to the interest paid by the Department.
The two examples below show how the equity you have left affects how much you pay back.
Equity is the money left after you pay back everything secured against your property including your mortgage.
If there isn’t enough money left to repay the loan in full, don’t worry. The Department for Communities will write off the remaining amount and consider the loan fully repaid.
Example 1
| You sell your property for | £95,000 |
|---|---|
| Outstanding mortgage amount (including any other secured loans) to pay back | £35,000 |
| Amount remaining | £60,000 |
| Support for Mortgage Interest loan amount and interest which will be recovered | £4,500 |
| Equity remaining | £55,000 |
Example 2
| You sell your property for | £80,000 |
|---|---|
| Outstanding mortgage amount (including any other secured loans) to pay back | £71,000 |
| Amount remaining | £9,000 |
| Support for Mortgage Interest loan amount and interest | £9,600 |
| Amount recovered | £9,000 |
| Amount written off | £600 |
Voluntary repayments
If you want to repay the loan more quickly, you can make voluntary repayments. The minimum voluntary repayment is £100 or the unpaid balance if it’s less than £100.
How to repay
You should contact the Department for Communities Debt Management. The Loan Management team will issue a settlement letter and this will tell you how much you need to pay.
You can pay:
- online - using the bank account details in your settlement letter
- by telephone - you’ll need your bank, building society or card details and your settlement letter
Ways you can pay your mortgage interest
When you know your mortgage details you will need to consider how to pay your mortgage interest. There are a few ways to do this.
Apply for a Support for Mortgage Interest loan
If you accept an offer of a Support for Mortgage Interest loan, the Department for Communities will make regular payments towards the interest on your mortgage and/or some home improvement loans.
You don’t need to pay back the Support for Mortgage Interest loan until you sell your property or transfer ownership.
Interest will be charged on your Support for Mortgage Interest loan. The Department for Communities may also place a charge or mortgage on your property. This means that your house can be used as a guarantee to pay the loan off when the property is sold or ownership transferred.
Contact your mortgage lender
Your mortgage lender may be able to suggest other ways to manage your mortgage payments, for example changing your mortgage interest rate.
Using savings and investments
If you have savings and investments, you may be able to use these to pay your mortgage interest or reduce the overall amount you owe your mortgage lender.
You may want to seek financial advice before doing this. The Department will not pay the cost of any advice you receive.
If you choose to do this, you will need to report this through your online account as using your savings may change the amount of Universal Credit you get.
Speak to a Credit Union or bank/building society
A Credit Union, bank or building society may be able to offer loans as well as savings and bank accounts. You’ll need to check what interest rates they charge.
Move to a different property
The size of your home and where it’s located can affect how much it is worth. Moving home may change the amount of mortgage you need – you may be able to have a smaller mortgage, or you may not need a mortgage at all.
These are just some of the options you may have. There may be more options for you to think about.
Other financial help with housing costs
You can still get financial help with your housing costs if your Income Support, income-based Jobseeker’s Allowance or income-related Employment and Support Allowance is going to stop because you are about to:
- return to work full-time
- work more hours
- earn more money
This is called the Mortgage Interest Run On. You can find out if you qualify for a Mortgage Interest Run On
Where you can get help and support
You need to decide if a Support for Mortgage Interest loan is the best option for you and your household. You may want to seek help and support from family and friends.
You can get free and impartial money advice from any independent advice office, or by contacting: