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SMI loan - interest payments

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Does anyone know if the SMI loan (that is replacing mortgage interest payments) continues to incur interest charges when the loan payments are stopped?

Or does the interest only apply while the loan is being given?

Thank you, Tim

Comments

  • It will continue to accrue interest until it is paid off.
  • Caz3121
    Caz3121 Posts: 15,833 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    similar to any loan I would imagine where you incur interest until the loan is paid back...this does not necessarily mean selling the property but could be making repayments once you are back in work
  • timK
    timK Posts: 9 Forumite
    Fourth Anniversary Combo Breaker First Post
    Thanks - and I was told the interest rate is 1.7%.

    Basic question, but does that mean if I had a loan for £400 per month, I would owe:

    £400 + 1.7% = £406.8 per month
    Per year = £406.8 * 12 = £4881

    Not sure if I understand it correctly.

    Thanks
  • poppy10_2
    poppy10_2 Posts: 6,588 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    timK wrote: »
    Thanks - and I was told the interest rate is 1.7%.

    Basic question, but does that mean if I had a loan for £400 per month, I would owe:

    £400 + 1.7% = £406.8 per month
    Per year = £406.8 * 12 = £4881

    Not sure if I understand it correctly.

    Thanks
    Almost right
    The 1.7% is the figure for the whole year
    It is calculated and compounded on a monthly basis
    So the calculation should look like this
    cBBkv36.png
    poppy10
  • Hi I am sorry to muscle in on this post but I have been offered an SMI loan and am concerned about the interest rate. All I know is it is based on gilt rates (haven't a clue what that is) and that the DWP can change this twice a year which presumably means this can go up. So when you sign the paperwork for this loan you don't know how much interest you could end up paying as it may not stay at 1.7%! This is obviously worrying. I have not had any luck speaking to DWP "helpline" about this and I wouln't sign another loan and not know what the interest rate was going to be. Does anyone have any information about this please?
  • marliepanda
    marliepanda Posts: 7,186 Forumite
    clanger66 wrote: »
    Hi I am sorry to muscle in on this post but I have been offered an SMI loan and am concerned about the interest rate. All I know is it is based on gilt rates (haven't a clue what that is) and that the DWP can change this twice a year which presumably means this can go up. So when you sign the paperwork for this loan you don't know how much interest you could end up paying as it may not stay at 1.7%! This is obviously worrying. I have not had any luck speaking to DWP "helpline" about this and I wouln't sign another loan and not know what the interest rate was going to be. Does anyone have any information about this please?

    You don't need to accept their help with your mortgage. If you want it, you will need to accept their terms. 1.7% is a very low rate for a loan so it may go up, will it go up to 3%, maybe? Will it go up to 20%? Probably not.

    But, as said, you do not need to accept their help.
  • BorisThomson
    BorisThomson Posts: 1,721 Forumite
    1,000 Posts Combo Breaker
    clanger66 wrote: »
    Hi I am sorry to muscle in on this post but I have been offered an SMI loan and am concerned about the interest rate. All I know is it is based on gilt rates (haven't a clue what that is) and that the DWP can change this twice a year which presumably means this can go up. So when you sign the paperwork for this loan you don't know how much interest you could end up paying as it may not stay at 1.7%! This is obviously worrying. I have not had any luck speaking to DWP "helpline" about this and I wouln't sign another loan and not know what the interest rate was going to be. Does anyone have any information about this please?

    The only information we know is that the rate is variable, it may reduce or increase in the future.

    Unfortunately there is no real advice available to help you with this decision. The helpline is not authorised to give financial advice, and for the same reason CAB cannot advise either.
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