With so many households struggling to meet their mortgage payments due to the current economic climate and the resulting redundancies it is worth knowing what government support is available. The main source of support comes in the form of the Support for Mortgage Interest (SMI) scheme. It is worth noting that no government scheme provides the same level of mortgage protection as mortgage payment protection insurance (MPPI).
Support for Mortgage Interest (SMI)
If you are claiming Jobseeker’s Allowance (for unemployment) or Employment and Support Allowance (for incapacity) then you may be entitled to claim for SMI. If you are eligible to claim SMI relief then the government would pay the interest on the first £200,000 of your mortgage at a standard interest rate of 6.08%, and for a limited period of two years. It is important to note that unlike mortgage payment protection the scheme will only pay for the interest proportion of your repayments and not any capital repayment. Before receiving any SMI benefit you would need to wait 13 weeks after your initial claim is made and the benefit will be paid directly to your mortgage lender. It is worth noting that with payment protection it is possible to receive your first payment after just 31 days.
Homeowners Mortgage Support (HMS)
There is another scheme that is government-backed which could relieve some of the mortgage interest burden should your household suffer an unexpected drop in income. Under the Homeowners Mortgage Support (HMS) scheme you may be entitled to delay some of your mortgage interest payments for up to two years. The interest is not written off but delayed and you may have to pay interest on the delayed interest. It is also necessary that you pay at least 30% of the monthly interests payment whilst on the scheme and transfer to an interest-only mortgage. It is also important to note that not all mortgage lenders have signed up for this scheme.
More information regarding these schemes can be found on the government’s DirectGov website.
Mortgage Payment Protection Insurance (MPPI)
MPPI is a private insurance policy that provides a monthly benefit to meet your mortgage repayments should you suffer accident, sickness or unemployment. You are entitled to cover your full monthly mortgage payment consisting of both interest and principal repayment. Given the limitations of government schemes MPPI is the recommended source of mortgage protection for both incapacity and unemployment.
Drewberry Mortgage Insurance provides advice and broking services for both mortgage payment protection and mortgage protection life insurance. If you need any assistance with these policies please feel free to contact us.