Home improvement loan, SMI etc

custardcream

Bit complicated - sorry. Please bear with! I have a mortgage from a house I bought last year using a substantial loaned deposit from my mum. All done via solicitors. We have a declaration of trust/second charge charge in place and I have agreed to pay her 5% interest (matched to the savings account where her money was previously). This is all very amicable and good. No pressure to repay imminently but the hope is my partner (who doesn’t currently live with me) will buy her out in a couple of years or I will sell and repay the total amount plus her interest at that point. 

Owning a house is a huge achievement for me and paying my bills comfortably even more so. I don’t have much left at the end of each month but I’m trying to invest what I have into the house to a) make it a nice place to live and b) to ensure I have the equity to pay everyone off if/when I need to. 

The obvious issue is the improvements that will make the biggest difference are the ones that need a bigger cash input. I’m quite handy/savvy and can do cosmetic stuff but for instance, new windows that would make a massive difference to the energy bills would cost more than I can see myself saving in a long while. Same with other updates like a new bathroom suite. Will say improvements *should* add value/be worthwhile comparing with sale prices of similar houses on my road.  

I don’t mind getting a loan if I can genuinely afford it and it’s a good rate. The curve ball is I’ve been told I’m eligible for a SMI loan (in receipt of UC). However the more I read, the more I don’t think it would work in my case as (if I understand correctly), the money would be paid to a lender and not to me to make home improvements.

The more I read on SMI loans, the less I understand tbh so any advice appreciated. 

My emphasis is living within my means now whilst being able to repay everyone when I need to. I’m not so concerned about walking away with a lump sum profit (although that would obvs be lovely). 

I’d also appreciate any other suggestions of things I could do.  Thanks in advance.
 

kaMelo

SMI, or to give it it's full title Support for Mortgage Interest, essentially does what it says on the tin, pays the interest on a mortgage for someone in receipt of a qualifying benefit who is struggling to pay their mortgage. (That's the idea anyway although the rate used by SMI to calculate the interest payment may differ from what you are currently paying possibly leading to a shortfall which you will have to make up to avoid falling into arrears.) It can also be used to pay interest on loans taken out for repairs and improvements to your home.
SMI is paid directly to your lender and however much you receive via SMI becomes a secured loan (a charge) on your home and repayable in full plus interest (currently 4.5%).

I guess it's up to you whether you think it's a good deal or not but you will have to borrow the money first from a commercial lender before applying for any help through SMI.  Whether anyone will lend to you will be down to affordability.

sammyjammy

Is your mum aware of the tax implications when charging interest on the loan?