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the change from SMI benefit to a loan?

Chris442Chris442 Posts: 1Member Listener
Hello I'm Chris and I am Autistic. I was wondering how many people are effected  the change from SMI benefit to a loan?

Replies

  • BenefitsTrainingCoBenefitsTrainingCo Posts: 2,145Member, Community advisor Chatterbox
    Hello. I'm afraid I don't know the answer to how many people will be affected by this change, but it will be a lot! As things stand, the government says that from April 18, help with owner-occupier payments will be paid as a loan. This will apply to income support, income based JSA, income related ESA, pension credit and universal credit. The loan will have to be repaid to the DWP when the property is sold, or when those benefits end. People will also have to pay administration costs and interest on the amount of help provided. We don't yet have any further information on the scheme, such as whether it will only affect new claims etc. Also, the government recently announced that the rate of interest used to calculate SMI is going to be reduced to 2.61% from 18th June, and this will affect all current and future claims.
    I hope this information is helpful.
    Jayne 
    The Benefits Training Co:
    Will Hadwen
    Lee Kempson
    Mary Shone
    Maria Solomon
    David Stickland

  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    edited August 2017
    Hi @chris442

    Sadly the change will affect new and existing claimants. Existing claimants won't need to pay back any SMI they've had to date, but from April 2018 it will become Loan for Mortgage Interest. The existing claimant will need to decide if they want to accept the loan or whether they can make other arrangements to service the mortgage interest payments. 

    There is still some time before this comes into effect and anything can change between now and April 2018 but it's best to start planning for this now if you're claiming SMI.

    Welfare Reform and Work Bill: Impact Assessment for Converting Support for Mortgage Interest (SMI) from a benefit into a Loan states that currently there are 170,000 claimants receiving SMI at a cost of £265 million per annum.

    We're keeping an eye on how this develops and will update if there are any developments.

    Best wishes
    Debbie
  • UncleRichardUncleRichard Posts: 1Member Listener
    How exactly is this going to work? Will the loan cover the whole of the mortgage interest or only that part that's currently covered by SMI, which may be less? Will it be a one-off loan to cover the estimated total interest for the life of the mortgage or will the loan be incremented each month? Who will provide the loan - the DWP or the mortgage provider?
  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    Hi @UncleRichard,

    Sorry for the delay answering your question. 

    You can find all of the answers you need in the Explanatory Memorandum to the Loans for Mortgage Interest Regulations 2017

    I hope this helps. If you have any questions after reading through, please let me know and I'll do my best to answer them.

    Best wishes
    Debbie
  • LisaPooleLisaPoole Posts: 2Member Listener
    Hi - I haven't had my letter yet, but I have read online that my mortgage help (part of my ESA) is going to stop in April. I am in receipt of ESA (support group) and DLA (lower rate). I also get help with my council tax. I do not wish to have a loan/charge on my property if it can be avoided.

    My Parents have been advised that they are allowed to 'gift' £3000 each, per year, without it affecting Inheritance Tax. I am an only child.  If they each pay £3000 per year, direct to my mortgage lender, will it affect my existing benefits? Would it be classed as 'income' if it is paid straight to my mortgage account and doesn't go via my own bank account? Hope you are able to help!
  • brownleebrownlee Posts: 1Member Listener
    Hi my son is disabled and receives smi. How can i help pay his morgage in full, either monthly or a lump sum towards it? Would this affect his benefits? Or is there another way round this, as he would really like to be morgage free, but with this new policy, now a loan ! It just puts pressure on someone with long term disabilities not knowing what the future might bring.
  • LisaPooleLisaPoole Posts: 2Member Listener
    Hi Brownlee I am in your Son's situation and my Parents want to do the same thing (see my post above). One thing you need to consider, that my dad found out about, is inheritance tax implications. I don't know your age/situation, but you can gift' £3000 a year per parent, without it coming into Inheritance Tax. A large lump sum, if anything should happen to you within 7 years I think it is, would count towards Inheritance limits.  I'm not sure of the benefits implications, as I haven't had a reply yet on this post. If you find anything out benefits wise, please reply to this post with an update to let me know, if you would be so kind, and I will do the same if we find anything out :)  I think we are going to try Citizens Advice, see if they know.
  • CockneyRebelCockneyRebel Posts: 3,874Member, Community champion Brian Blessed
    This is something that requires trained advice for, CAB is a good starting place

    CR
    Be all you can be, make  every day count. Namaste
  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    Hi @brownlee and @LisaPoole,

    I'd be happy to help you work this out but I need to ask some further questions. It's probably not going to be practical to work this out on the community though, so if you're able to either private message me or send me an email at [email protected], I can find out more from you and find the right information for you.

    I hope this is ok and I hope to hear from you again soon. 

    Best wishes
    Debbie
  • poppyredpoppyred Posts: 14Member Listener
    Hi I am in the ESA support group (well I am at the moment had medical last week) I am 61 and also get PIP.
    Had the call today about SMI becoming a loan in April which I have decided to accept (no other option) I have no family, no partner so basically once the mortgage is covered (there is enough equity in the house to cover that) then any remaining money remains in my pocket.
    For me, it is what happens today that is important the rest will have to form a queue.
    I asked the person on the phone if the buildings societies were happy with this loan agreement and a charge being placed on the house, she sort of hesitated and did not really give me an answer.
    So my question is, does anyone on here have what the views of the banks and BS are?

    I am finding this all very daunting, especially as I live alone and do not have anyone who I can trust to ask these questions.

    Many Thanks
    Poppy
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  • CockneyRebelCockneyRebel Posts: 3,874Member, Community champion Brian Blessed
    The bank or building society has the first charge on the property and will be paid in full before the DWP see a penny, when the property is sold.

    CR
    Be all you can be, make  every day count. Namaste
  • poppyredpoppyred Posts: 14Member Listener
    The bank or building society has the first charge on the property and will be paid in full before the DWP see a penny, when the property is sold.

    CR

    Thanks CR so much to worry about, have I passed my medical, PIP runs out this year so will need to reapply for that and then this damn SMI loan, all seems very overwhelming - how do they expect ill people to deal with all of that. :(

  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    Hi @poppyred,

    If you need to talk things through please do get in touch with me at the helpline.

    In answer to your question about the views of lenders and building societies I came across an article by Mortgage Strategy from last August last year. It does mention low awareness for both consumers and lenders. Whether this is still the case, I don't know but I'm trying to find out more and will share with the community as and when I find information.

    Best wishes
    Debbie

  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    I just came across another article, this one from Love Money.

    Part of the article says

    "Royal London has slammed the Government for not providing enough support to make such an important financial decision.

    Struggling homeowners are being instructed to take out a second mortgage – without being told the interest rate at which they will be borrowing.

    Those impacted by the switch are being directed to the Money Advice Service and Citizens Advice for help but Royal London says these services will only provide generic guidance rather than tailored advice."

    This is certainly what we're recognising at the helpline, the lack of tailored information is very worrying. Even some of the generic information isn't really all that helpful.

  • poppyredpoppyred Posts: 14Member Listener
    I just came across another article, this one from Love Money.

    Part of the article says

    "Royal London has slammed the Government for not providing enough support to make such an important financial decision.

    Struggling homeowners are being instructed to take out a second mortgage – without being told the interest rate at which they will be borrowing.

    Those impacted by the switch are being directed to the Money Advice Service and Citizens Advice for help but Royal London says these services will only provide generic guidance rather than tailored advice."

    This is certainly what we're recognising at the helpline, the lack of tailored information is very worrying. Even some of the generic information isn't really all that helpful.


    This is exactly what I found yesterday, the person who rang me kept saying'they should know'!! basically she was reading from a script and any deviation left her stumped.
    I have also read that some lenders had no real idea about this (so how are WE expected to make an informed decision when the so called experts seem in the dark.

    I am going to have to go with it, circumstances etc leave me no choice, but it seems unfair on many levels, how are people who are ill meant to know what to do for the best when their is very little guidance.

  • poppyredpoppyred Posts: 14Member Listener
    Hi @poppyred,

    If you need to talk things through please do get in touch with me at the helpline.

    In answer to your question about the views of lenders and building societies I came across an article by Mortgage Strategy from last August last year. It does mention low awareness for both consumers and lenders. Whether this is still the case, I don't know but I'm trying to find out more and will share with the community as and when I find information.

    Best wishes
    Debbie


    Thanks Debbie, I a finding it all very scary, I can only go with what is on offer as I have no other means of paying the mortgage and selling is not on the cards at the moment.
    There is capital to cover the loan plus I am only looking at a few years (4 at the most) and who knows what could and might happen in the meantime) I cannot health wise afford to get hung up on this, there are so many battles to face and fight.
    I will nearer the SMI change over date contact my lender (they might be a little more up to speed by then) you can tell I  prefer to live in hope :smiley:

    Thanks....
  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    I completely agree with you @poppyred, there is very little guidance available to help people to decide. It's not just the immediate effect but further ahead in the future too. There's so little information to go on, how are you supposed to know what's best.

    This is after all a second mortgage and has the same risks associated to it as a first mortgage or secured loan in respect of the debt defaulting and repossession action being taken by the lender. I'm not suggesting this is going to be the case but if I was looking to make a major decision like this I would want some amount of certainty and clear advice before I commit. 
  • suepointingsuepointing Posts: 4Member Listener
    I've been worried about this since I've got the letter I don't want another debt and what happens if I or my husband die and the one left wants to carry on living in the home or ;will we be force to leave our homes like this debt is been force on us and it seem very unfair I did't have the right to buy to help buy my house if i sold up they would then pay my rent except I can't sell up the house is kitted out with equipment to help me and I can't afford to buy them again plus it our home and there not enough money in it to sell it so what choice do we have none
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  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    Hi @suepointing,

    Welcome to the community and thanks for your post. 

    There's so many unanswered questions like yours and not very much time to find the answers and make a decision. 

    I'm glad you've found our community and I hope you find all the SMI discussions helpful. There's a great bunch of people here on this community and it's great to have you with us.

    Best wishes
    Debbie
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  • Debbie_ScopeDebbie_Scope Posts: 943Member, Helpline, Community advisor Chatterbox
    Hi @Ella1976,

    I'm not sure about the equity release part.
    I need to double check what the interest rate is. I think it might be 1.7% but that's an off the top of my head answer. I'll come back when I've verified it.

    If you find any good information let us know.

    Best wishes
    Debbie
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  • suepointingsuepointing Posts: 4Member Listener
    Why is it that none off the newspapers have pick up what happening we've  been
    force to borrow money or not eat neither have any of the party have said a thing about this and it must have been threw parliament in a way they are going to rebuild the housing stock with our homes and then give the money away with the right to buy I just don't understand how know one seem to care about this and it not been mentioned in any paper also if you rent your home your not effect by this but we have to pay for repair and not get any help at all except to build up a debt this is so  frightening I've lost a lot of sleep and I'm sure a lot of you have lost a lot too 
  • suepointingsuepointing Posts: 4Member Listener
    Just just a thought if your in the income related esa because of your mortgage interest payment if they no longer pay this will we still be eligible for help with council tax, and other bits that we get because of that as I'm always been asked what sort of esa are we on I'm worried we will not be on the income related at more as the mortgage interest was the only thing listed on it if we paid rent that would be on that 
  • TopkittenTopkitten Posts: 474Member Chatterbox
    This whole situation is an yet another attempt to get people to sell their properties so they can get out of paying benefits. The lack of information is probably deliberate in order to frighten people into believing they must sell.

    They do not EXPECT people to be able to deal with it. They do not WANT people to be able to cope. They WANT people to sell their properties so they can be paid less benefit.

    The whole thing is disgusting from that point of view but then their is the opposing opinion by those that do not own a property as to why home owners get special treatment.

    Divide and conquer I guess.

    I think eventually people will be forced into selling their home in order to qualify for benefits. It is bound to be a difficult transition if that IS their intention.

    TK
  • suepointingsuepointing Posts: 4Member Listener
    Why people that rent get there rent paid if we all sell it going to cost my if we all rent as they will have more to pay as rents is more than just interest on a mortgage 
  • TopkittenTopkitten Posts: 474Member Chatterbox
    @suepointing that is very true it will cost them more in the long term but governments only last 4 years so the future doesn't bother them. If you sell you have money to live on and that means no benefits until it runs out. A short term saving and, as I said, beyond 4 years is of no interest to them.

    TK
  • suegbsuegb Posts: 1Member Listener
    They're happy for us to rent privately cos there mates are the landlords. Any rent the State pays goes into their mates pockets.
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