Support For Mortgage Interest (SMI) Question

Regina1984

Hi there

I am really struggling financially at the moment as I have a long term disability and 3 children and a mortgage to pay alone as a single parent (husband left almost 2 years ago)

I was in receipt of the mortgage interest grant before it turned into a loan. I decided to ask for the loan and am expecting the phone call from Serco today but am now panicking about whether or not I should do it.

I could keep up with the mortgage but that would mean sacrificing things like electricity and gas time (I have a smart metre) survive on less food and cheaper tinned products rather than fresh fruit and veg etc and also might have to cancel my children't gymnastics / football classes which are essential to them as it gives them an outlet where I can't do things with them.

My current situation is that my remaining mortgage is approx £107,700 and the interest rate is 2.04%
The interest grant was getting paid at £260 ish every 4 weeks.

I just want to know if it's going to cost me more in the long run to take out the loan? I am trying to build my credit rating up so we can move closer to family in the next year but unsure whether I will sell to part ex for a new build or just rent out mine to pay the mortgage and keep as an investment to fall back on and rent somewhere smaller and cheaper. Or perhaps even get a mortgage on a smaller place and keep my house as a rental if I can figure out a way to get a suitable job when I'm better?
I just don't want to have 2 loans racking up lots of interest, I really struggle to understand these things. I would be in a better position financially if I took the SMI loan but then again I don't want the government taking a massive cut of interest if I were to sell the house if it's gonna be more than my mortgage provider. Ufff I am sorry to sound so stupid but I'm in a real tiz-was at the min trying to figure out what the heck to do.

Thank you so much for any advice.

Kindest regards

Regina xx

Tomsdottir

Hallo Regina
Since the loans which replace SMI are a financial product rather than a benefit, it would be a good idea to get advice on your specific circumstances from one of the money advice charities which do this free. Stepchange and the Money Advice Trust are two of the main ones. I know that some can give advice via webchat. They also have quite a bit of information on their websites about how to decide what to do about your mortgage.

kingfisherblue

As you are considering moving, my first question is whether you are working. You mention the possibility of a new mortgage, but if you are not working, getting one will be difficult. There are providers who give mortgages to those on benefits, but interest rates are usually high.

If you don't sell, but rent out instead, you will have the responsibilities and costs of being a landlord, and that is assuming that your mortgage provider allows you to rent the house out. You would also be considered as having an income from the rent, which could impact on any income related benefits that you receive.

My understanding of SMI is that once a property is sold, the loan has to be repaid, with interest. I received a phone call from SERCO early this year about it, as I was also in receipt of SMI (about £85 a month in my case). However, I don't have long to go on my mortgage, and decided that I would rather struggle now, than face a loan repayment at a later date. Even once the SMI finishes, I believe that the interest continues to mount up.

As you are considering moving, it would definitely be worth getting more specialist advice.