Is Support for Mortgage Interest a good thing

happyman70

Hi, I have been offered SMI but not sure if to take it or not. I would like to hear people's opinions. I am worried that when I come to sell the house then I would be paying back a lot more than I would if I kept my mortgage.

Because I have been accepted and need to decide if to carry on with it, I am being asked if I want to get the help as I have been approved and they can back date it 12 months as that is how long it has taken.

I am trying to decide if I should accept it or not and what the pros and cons are. 

tacpot12

You may have misunderstood how SMI works. You keep your mortgage and use the SMI loan to pay the interest that is due on the mortgage.

A single interest rate (currently 3.66%) is used to calculate all SMI loans, so the loan may not pay all the interest that is due on your mortgage. You also remain responsible for making the capital payments on your mortgage. Your lender may be prepared to switch you to an Interest-only mortgage, but this will result in you having to sell your home at the end of the mortgage. The SMI loan(s) normally need to be repaid when the home is sold. 

You can have a new SMI loan each year you remain eligible for the benefit that qualified you for it in the first place. 

Getting the loan backdated is sensible if it prevents your lender from seeking to repossess the property. You will pay more back more using SMI loans than if you carry on with your mortgage. The question is Can you carry on with your mortgage?   

happyman70

tacpot12 said:

You may have misunderstood how SMI works. You keep your mortgage and use the SMI loan to pay the interest that is due on the mortgage.

A single interest rate (currently 3.66%) is used to calculate all SMI loans, so the loan may not pay all the interest that is due on your mortgage. You also remain responsible for making the capital payments on your mortgage. Your lender may be prepared to switch you to an Interest-only mortgage, but this will result in you having to sell your home at the end of the mortgage. The SMI loan(s) normally need to be repaid when the home is sold. 

You can have a new SMI loan each year you remain eligible for the benefit that qualified you for it in the first place. 

Getting the loan backdated is sensible if it prevents your lender from seeking to repossess the property. You will pay more back more using SMI loans than if you carry on with your mortgage. The question is Can you carry on with your mortgage?   

my mortgage is £670 and is 9.8% interest which is shocking. but because I am disabled that is what I am stuck with. My mortgage was sold with more than 200,000 other mortgages by my original mortgage company and they jumped it up from 5.6% to this and because of my credit history as I do not work I had no other option.  I am with engage credit. I am struggling but just managing to pay it. I am not sure if to accept it or not and if I was going to accept it, if to accept backdated 12 months. just dont know what to do

Brie

What is your alternative?  Sell the house and move to something smaller or rent?  Or take the SMI.

tacpot12

In your situation, I think the SMI loan is likely to be a good thing. 

If you take the SMI loan each year, you will be better able to cope financially, however, the loan will need to be repaid, and this could leave you unable to afford to downsize in future. The SMI loan will be paid directly to Engage Credit, and you will then be able to reduce your own payments by upto the amount of the SMI loan that has been paid to them. You don't have to reduce it completely; by not reducing it by the maximum amount you are effectively over paying your mortgage, which will save a lot of interest due to the high interest rate (Your mortgage may have a restriction on how much you are allowed to overpay your mortgage, so you should check this first if think you might want to reduce your own payment by less than the maximum that the SMI loan will allow).

Overpaying your mortgage in this way will allow you to start to pay of the SMI loan once the mortgage is cleared, and you may even be able to do this before you have to downsize, so it would not impact on ownsizing at all. 

If you back date the SMI loan, this will save you a lot on your mortgage, but again, there might  be a limit on the amount of overpayment you are allowed to make, so check this before asking for the maxium backdating.