There have been changes in the help that people can get with mortgage interest payments from 1st April 2016 and further changes are planned in April 2018.
Who can get help with mortgage interest payments at present?
If you claim certain benefits you may be able to get help with paying your mortgage interest and interest payments on any loans you have taken out for essential repairs and improvements. The benefits which can give this additional help are:
Income Based Job Seekers Allowance (IBJSA)
Income Related Employment and Support Allowance (IRESA)
Income Support (IS)
Pension Credit (PC)
Universal Credit (UC) (although home owners would not normally satisfy the gateway conditions)
If you are receiving one of these benefits you should ask the relevant DWP office to provide you with a form to claim for the mortgage interest or loans concerned. You should complete the form with as much information as possible. You will have to provide details about the mortgage. Your lender has to complete the form as well to confirm details of the loan. The form you need to make your claim is called an MI12.
Loans for Home improvements or other loans
If you get IBJSA, IRESA, IS or PC you can get help with the interest you have to pay on loans taken out for:
- Essential repairs or improvements to your home (eg insulation, making the home safe, repairs to a heating system or adaptations for a disabled person)
- Buying your ex-partner’s share of the house if you have separated
If you get UC you can get help with the interest due on loans secured on the property you live in regardless of the purpose of the loan.
Waiting Times for Help with mortgage interest
People who are over the age of 60 are entitled to help with mortgage interest payments straight away but there are waiting periods for everyone else.
The waiting period was 13 weeks for claims which started before 31st March 2015.
The waiting period changed to 39 weeks from 31st March 2016. The new waiting period only applies when the claim to the relevant benefit is made after this date. So people who were part-way through their 13 week waiting period on 31st March 2016 do not have to wait an additional 26 weeks.
The rules about the way these periods are calculated can be complex so you may need to get more advice about this particularly if you feel a period you have spent on another benefit should count towards your waiting period.
Time limit for payment of mortgage interest payments
If you get IBJSA you can only claim help towards your mortgage for a period of 2 years (unless your IBJSA award started before 5th January 2009). There is no time limit for the length of time you can receive payments for the other benefits.
Interest Rates used by DWP to calculate mortgage interest payments
The DWP use the Bank of England’s published Average Mortgage Rate (currently 2.61%) It is only adjusted when the published average mortgage rate varies by 0.5% or more. The DWP do not take into account the actual mortgage interest rate you pay.
If you get help with your mortgage interest from Universal Credit the amount you are paid will only be recalculated annually.
How much of your mortgage will DWP help with?
DWP can help with mortgages of up to £200,000 if you are claiming IS, IBJSA, IRESA or UC. The loan limit is £100,000 if you are claiming PC. If you start getting help with your mortgage through Pension Credit (PC) within 12 weeks of getting help through IS, IBJSA, IRESA or UC you can get help on loans up to £200,000.
The DWP will not help you to repay the capital you originally borrowed and will also not pay towards any investment linked to your mortgage such as an endowment policy, pension or ISA.
Reduced payments for large or costly homes
DWP can reduce the amount they pay you if they feel that your home is more expensive or larger than you need. You may be able to argue against this if you can show it is not reasonable to expect you to move somewhere smaller or cheaper. You should seek advice about this.
Shared ownership schemes
If you live in a shared ownership scheme you may be able to get help with both the rent element and the mortgage element. If you are getting Universal Credit this will all be paid by DWP but in the case of the other benefits the rent element will be paid by the local authority.
Future changes to help with mortgage interest
It should be noted that the Government are intending to amend the rules from April 2018 so that where new payments of help with mortgage interest start after this date they will become loans which will have to be repaid on the sale of the property or when the claimant returns to work. The payments made will also accrue interest. It is understood these changes will not apply where the help with mortgage interest started before April 2018. More information about the details of this scheme will be published here when they are available.