Sickness or Redundancy and State Help on Mortgage Payments

Got a mortgage?  Going through or expecting to go through the pain of higher mortgage interest rates shortly? 

• What if you were in an accident?
• What if you are off sick long term?
• What if your business or employer struggles through the economic slowdown or goes into liquidation?

What provisions have you made to protect your mortgage and your home?  Are you really paying more for your motor finance, insurance, television subscriptions, mobile phone contract or holidays than you are on sickness or redundancy insurance protection? 

If so, more fool you.  Without some form of income protection insurance, you may lose your home, your car, your savings or worse.  “But State Benefits will help won’t they?”  No, not really.

State Help:  Support for Mortgage Interest (SMI):

• Statutory sick pay (SSP) is payable by your employer for a maximum of 28 weeks, you then may qualify for Employment and Support Allowance (ESA) or Universal Credit.
• You do not qualify for SMI until you have been receiving Job Seekers Allowance (JSA), Income Support, Employment and Support Allowance (ESA) or Universal Credit for 39 weeks.
• So, if you are long term sick, that could be up to 67 weeks before you receive any SMI help.  That’s just over 1 year and 3 months before any mortgage help.
• Or, if you are made redundant, depending upon savings and any redundancy package you receive, it could be a few weeks or more before you qualify for benefits and then 39 weeks of benefits before you qualify for SMI.

How much is SMI?

• It is only the mortgage interest or certain home improvement/repair loan interest that would receive some state help.  It is not the capital value repayments, only the interest payments.
• Insurance premiums and any mortgage arrears are not covered.
• Interest help is only offered on the first £200,000 of your debt or £100,000 if you were already on pension credit or other benefits when the clock starts ticking to 39 weeks.
• SMI is covered up to an interest rate of currently just 2.65% pa. 
• If your mortgage rate is 6% pa, your lender will only receive State SMI payments up to the 2.65% pa interest rate meaning your debt is still increasing.  This is on top of any mortgage debt you had already built in the say 39 weeks before you become eligible for SMI.

Final Blow:  Interest Charged on SMI

SMI is a government loan; it is not a benefit or grant.  It must be repaid.  The State charges an interest rate of 3.03% pa on the SMI payments it is has made to your lender.

Do not leave to chance you or your loved ones having a roof over their heads if you lose your job or if long term illness stops you working.  Talk to us about Accident, Sickness and Unemployment insurance (ASU) or income protection insurance or critical illness insurance.

We repeat:  Are you really paying more for your motor finance, insurance, television subscriptions, mobile phone contract or holidays than you are on sickness or redundancy insurance protection? 

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