Universal Credit With a Mortgage: Support for Mortgage Interest Explained

By Jake Stott, Knox Mortgages. Reviewed by an adviser authorised under Fort Advice Bureau, FCA FRN 972730. Published 25 September 2026. Last reviewed 25 September 2026.

Yes, you can claim Universal Credit if you have a mortgage. The home you live in is ignored as capital, so owning it does not stop a claim. What Universal Credit will not do is pay your mortgage. The housing element covers rent, not mortgage payments. The only government help with the mortgage itself is Support for Mortgage Interest (SMI): a loan, secured on your home, that pays some of the interest direct to your lender after you have been on Universal Credit for 3 months in a row.

This page is for homeowners who have lost income, through redundancy, illness, a relationship ending or self-employed work drying up, and need to keep the mortgage paid. It covers what Universal Credit does and does not pay, how SMI works with the arithmetic shown, what your lender must offer under the Mortgage Charter, what each option does to your credit file, and whether you can remortgage while on benefits. If you are trying to buy a home on Universal Credit, that is a different question, answered on our mortgage on Universal Credit page.

Can I claim Universal Credit if I have a mortgage?

Yes. Universal Credit is means-tested on income and savings, and the home you live in is disregarded when your capital is counted. You can own a £400,000 house outright and still qualify if your income is low enough and your other savings are under the limit. The capital rules that do apply are: savings and investments under £6,000 are ignored, savings between £6,000 and £16,000 reduce your award, and over £16,000 you cannot claim at all. A second property, such as a buy-to-let or a flat you have moved out of, does count as capital, although there are time-limited disregards if you are trying to sell it or have left it after a relationship breakdown.

Joint owners are assessed the same way. If you and your partner own the home together and claim as a couple, the property is still disregarded. If you own the home with someone outside your claim, such as a sibling or former partner, only your share of the mortgage counts towards SMI later on. The point is simple: having a mortgage never blocks a Universal Credit claim. It just means the claim will not cover your housing cost in the way it would for a tenant.

Does Universal Credit pay your mortgage?

No. The housing element of Universal Credit pays towards rent. Homeowners get nothing towards their mortgage payments from Universal Credit itself. That is the part most people do not realise until they claim, and it is why the first months after a job loss are the most dangerous for a homeowner.

There are two narrow exceptions. First, if you own a leasehold flat, Universal Credit can help with eligible service charges, but only after 9 months of continuous Universal Credit and only if nobody in the claim has earnings. Second, after 3 months on Universal Credit you can apply for SMI, which is a separate loan, not part of your Universal Credit award. The table below sets out what a homeowner can and cannot get.

Housing cost	Paid by Universal Credit?	Notes
Mortgage capital repayments	No	Never covered, by UC or SMI
Mortgage interest	Not by UC itself	SMI loan after 3 months on UC, capped at £200,000 of borrowing
Secured loans for repairs or improvements	Not by UC itself	Can be included in SMI if used for qualifying work on the home
Leasehold service charges	Yes, with conditions	After 9 months of continuous UC, and only with no earned income in the claim
Ground rent	No	Not an eligible owner-occupier cost
Mortgage arrears	No	SMI cannot clear missed payments
Life cover or payment protection premiums	No	Not covered by UC or SMI

If I lose my job, will Universal Credit pay my mortgage?

Not straight away, and never in full. If you lose your job and claim Universal Credit, the first 3 months bring no help with the mortgage at all. After that, SMI can start paying part of the interest, but not the capital, and the interest is calculated at a government standard rate rather than your actual rate. Most homeowners on a repayment mortgage will still face a monthly shortfall even once SMI starts.

That is why the order of events matters. Claim Universal Credit on the day your income stops, because the 3-month SMI clock only starts when your claim starts. Call your lender in the same week, before you miss a payment, because the forbearance options under the Mortgage Charter are designed for exactly this situation and they are easier to agree while your account is up to date. Check any mortgage payment protection, income protection or critical illness cover you already hold, because a policy bought years ago may pay out now. Then use SMI as the bridge for the interest, not the whole plan.

What is Support for Mortgage Interest?

Support for Mortgage Interest is a government loan that pays towards the interest on the mortgage for the home you live in, and on certain loans taken out for repairs and improvements. It has been a loan rather than a benefit since April 2018. The Department for Work and Pensions pays the money directly to your lender, charges interest on the loan, and takes a legal charge on your home ranking behind your mortgage. You repay it when you sell or transfer the property, not month by month.

You need to be getting a qualifying benefit: Universal Credit, Pension Credit or income-related Employment and Support Allowance. On Universal Credit you must have been receiving it for 3 months in a row, or have moved to Universal Credit within a month of another qualifying benefit ending with 3 months in total across the two. There is no credit check. Since 3 April 2023 there is also no bar on working: the old zero earnings rule, which stopped SMI if you or your partner did any paid work at all, was removed, and the waiting period was cut from 9 months to 3.

SMI rule	Current position
Qualifying benefits	Universal Credit, Pension Credit, income-related ESA
Waiting period on Universal Credit	3 months in a row (9 months before April 2023)
Waiting period on Pension Credit	None, starts with Pension Credit
Can you work and get SMI on UC?	Yes, since the zero earnings rule was removed on 3 April 2023
Maximum borrowing covered	£200,000 (£100,000 on Pension Credit)
Rate used to calculate payments	3.66% standard rate
Interest charged on the SMI loan	4.5% (can change no more than twice a year)
Who receives the money	Your lender, directly
When it is repaid	When you sell or transfer ownership of the home
Credit check	None

Rates are as published on GOV.UK at the date of review and are set by the government, so check the current figures before you apply.

How is Support for Mortgage Interest calculated?

SMI is calculated on your outstanding mortgage balance, capped at £200,000, multiplied by the government standard rate, currently 3.66%, and divided by 12. Your actual mortgage rate is irrelevant. If your deal is at 4.8%, SMI still pays at 3.66%. If you have a repayment mortgage, the capital part of each payment is not covered at all. Qualifying secured loans for home repairs or improvements are added to the mortgage balance before the cap is applied.

Worked example: a £180,000 repayment mortgage

Illustrative figures. A homeowner has £180,000 outstanding on a repayment mortgage at 4.8% with 22 years left. Their normal monthly payment is £1,105. They lose their job, claim Universal Credit, and qualify for SMI after 3 months.

Step	Calculation	Result
Eligible balance	£180,000 (under the £200,000 cap)	£180,000
Annual SMI	£180,000 x 3.66%	£6,588
Monthly SMI paid to lender	£6,588 / 12	£549
Actual monthly payment	£180,000 over 22 years at 4.8%	£1,105
Monthly shortfall	£1,105 minus £549	£556
SMI loan after 12 months of payments	12 x £549 = £6,588, plus 4.5% interest added	about £6,726
SMI loan after 24 months of payments	24 x £549 = £13,176, plus interest	about £13,760

Two things stand out. The homeowner still needs to find £556 a month, which is where a lender forbearance arrangement comes in. And the SMI debt grows at around £6,700 a year, which comes out of the equity when the house is sold. With a £300,000 balance, the cap bites: SMI is worked out on £200,000, so it pays £200,000 x 3.66% / 12 = £610 a month, whatever the true interest bill.

How do you repay an SMI loan?

You repay SMI in one lump sum when you sell the home or transfer ownership, including on death unless a surviving partner takes the loan over. Interest is added until it is repaid. There is no monthly repayment while you live in the home, and you can make voluntary repayments at any time, with a minimum of £100 or the outstanding balance if lower.

On a sale, your mortgage lender and any earlier secured loans are paid first, then the SMI loan from what is left. If the remaining equity does not cover the SMI balance, the rest is written off. That makes SMI a low-risk form of borrowing for most people, but it is still borrowing at 4.5%, and it reduces the equity you walk away with. If a surviving partner inherits the home, they can take on the loan and it does not have to be repaid until they sell. Other heirs must repay it from the estate. When your benefits stop, for example because you return to full-time work and your Universal Credit ends, SMI payments stop, but the loan itself stays in place until you sell.

Should you take SMI or not?

For most homeowners on Universal Credit with little equity pressure, SMI is worth taking. It is cheaper than any unsecured borrowing, needs no credit check, is paid straight to your lender, and any shortfall on a sale is written off. The case against it is narrower: if you expect to be back in work within a couple of months, if your lender will give you a payment holiday or interest-only period that covers the gap anyway, or if the extra charge on your home would complicate a planned sale or remortgage.

The better question is not SMI or nothing but which combination. SMI covers part of the interest. Your lender can cut the payment to close the rest of the gap. Protection policies can pay a monthly benefit. Treat them as layers. If you own the home with someone who is not in your benefit claim, are already in arrears, or have a debt management plan running, get advice before applying, because each changes the numbers. Citizens Advice and StepChange give free debt advice, and a mortgage adviser can tell you what your lender options look like against a future remortgage.

What must your lender offer under the Mortgage Charter?

The Mortgage Charter, agreed between the Chancellor, the FCA and lenders covering around 90% of the mortgage market in June 2023, sets out support lenders will give borrowers who are worried about payments. If you are up to date with your payments, you can ask to switch to interest-only for 6 months, or extend your mortgage term to reduce payments, with the option to switch back to your original term within 6 months. Neither needs a fresh affordability check and neither is reported to your credit file. Lenders have also agreed not to force repossession within 12 months of the first missed payment without your consent, except in exceptional cases.

Beyond the Charter, FCA rules on fair treatment of borrowers in financial difficulty require lenders to consider a range of forbearance options. The table sets out the main ones.

Option	What it does	Effect on the £1,105 example	Credit file
Temporary switch to interest-only (Charter, 6 months)	You pay only the interest for a set period	Payment falls to about £720 a month	Not reported if agreed under the Charter while up to date
Term extension (Charter)	Spreads the balance over more years	Extending 22 to 35 years cuts the payment to about £886	Not reported under the Charter
Payment deferral or holiday	Payments paused or reduced, interest still runs	Interest added to the balance	May be recorded as an arrangement to pay
Reduced payment arrangement	You pay what you can, the rest builds as arrears	Balance of arrears grows each month	Recorded as an arrangement or arrears
Capitalising arrears	Arrears added to the loan once you are back on track	Higher balance, higher future payments	Past arrears stay on file for 6 years

Combining the Charter with SMI is where most homeowners get stable. In the example above, a 6-month interest-only switch takes the payment to £720, and SMI at £549 leaves £171 a month to find, instead of £556.

Will claiming Universal Credit or SMI affect your credit file?

Claiming Universal Credit does not appear on your credit file, and there is no credit check to get SMI. What affects your credit file is how the mortgage account itself is reported. Missed or partial payments are recorded as arrears and stay visible for 6 years. An arrangement to pay, where the lender accepts reduced payments, is usually flagged on the account. Term extensions and interest-only switches agreed under the Mortgage Charter while you are up to date are the exception: lenders have committed not to report them in a way that damages your score.

The practical lesson is to act before the first missed payment, not after. A Charter arrangement agreed while your account is clean protects your file. The same shortfall left to become arrears will follow you into your next remortgage application. If you already have missed payments, our guide to getting a mortgage with missed payments explains how lenders treat them by age and severity, and if you have entered a formal plan, see mortgages with a debt management plan.

Should you speak to your lender or a broker first?

Your lender first, if the problem is paying this month. Only your existing lender can agree an interest-only switch, a term extension or a payment arrangement on your current mortgage, and SMI is paid to them. A broker cannot negotiate forbearance on your behalf in the way your lender’s financial support team can. Call them before the payment date, have your income and outgoings to hand, and ask specifically about the Mortgage Charter options.

A broker becomes useful when the question moves from surviving this month to what happens next: your fixed rate is ending, you want to know whether a remortgage is possible on your current income, you need to release equity or restructure debt, or you are weighing a sale. That is where comparing the whole market matters.

Situation	Speak to first	Why
You cannot make next month’s payment	Your lender	Only they can agree forbearance on the current loan
You want SMI	DWP via your Universal Credit journal	SMI is applied for through the DWP, not the lender
Serious unsecured debts as well	Free debt adviser (StepChange, Citizens Advice)	Priority debt advice and formal solutions
Your fixed rate ends in the next 6 months	A mortgage broker	Compare a product transfer with a remortgage
You are back in work and want to restructure	A mortgage broker	Whole-of-market lender criteria for recent job changes

Can you remortgage while on Universal Credit?

Sometimes, but the easiest route is usually a product transfer rather than a full remortgage. A product transfer is a new rate with your existing lender, and most lenders offer them to borrowers who are up to date with payments without a fresh affordability assessment, which matters when your income has dropped. The Mortgage Charter also commits lenders to let up-to-date borrowers switch to a new deal at the end of a fixed rate without new affordability checks. Our comparison of a product transfer versus a remortgage sets out when each makes sense.

A full remortgage to a new lender means full affordability. A small number of lenders accept some Universal Credit elements as income alongside earnings, but Universal Credit alone rarely supports much borrowing, and the new lender will see any recent arrears. An SMI loan adds a second charge that must be declared, and new borrowing may need the DWP charge dealt with. For most homeowners on Universal Credit the right sequence is: stabilise with the lender and SMI, protect the credit file, take a product transfer when the fix ends, then remortgage once income is back and 3 to 6 months of payslips are in hand. Our guide to mortgages on benefits covers which benefit income lenders accept.

Case study: redundancy, SMI and a Charter term extension

Illustrative case based on a typical Knox enquiry. Details anonymised and figures rounded.

A homeowner in Greater Manchester was made redundant in January with £165,000 outstanding at 5.1% and 19 years left, paying around £1,130 a month. Her redundancy pay covered two months. She claimed Universal Credit the week she finished work and called her lender before the February payment. Under the Mortgage Charter the lender agreed a 6-month interest-only switch, dropping the payment to about £700. From April, SMI started at £165,000 x 3.66% / 12 = £503 a month, paid straight to the lender, leaving roughly £200 a month to find from her Universal Credit.

She found part-time work in August, which under the post-2023 rules did not stop SMI, and full-time work in November. Her fixed rate ended the following spring. Because her account had no arrears, she took a product transfer with no affordability check, and the SMI loan of around £4,000 stays on the property until she sells. Her credit file shows no missed payments.

Frequently asked questions

Can I claim Universal Credit if I have a mortgage?

Yes. The home you live in is not counted as capital for Universal Credit, so owning it with or without a mortgage does not stop a claim. Your income and savings are what matter: savings over £16,000 rule you out, and savings between £6,000 and £16,000 reduce the award. A second property does count as capital.

Does Universal Credit pay mortgage payments?

No. The Universal Credit housing element pays towards rent, not mortgages. The only help with mortgage costs is Support for Mortgage Interest, a separate loan that pays part of the interest to your lender after 3 months on Universal Credit. Capital repayments are never covered, and leasehold service charges are covered only after 9 months with no earnings.

How long do you have to be on Universal Credit to get SMI?

3 months in a row. The waiting period was cut from 9 months to 3 on 3 April 2023. If you moved to Universal Credit within a month of another qualifying benefit ending, time on both counts towards the 3 months. On Pension Credit there is no waiting period.

Can I work and still get Support for Mortgage Interest?

Yes. Since 3 April 2023 the zero earnings rule no longer applies, so you or your partner can do paid work and still receive SMI as long as you are getting Universal Credit. Before that date, any earnings in the household stopped SMI completely. If your earnings rise enough to end your Universal Credit, SMI stops too.

What interest rate is charged on an SMI loan?

4.5% at the date of review, per GOV.UK. That is separate from the 3.66% standard rate used to calculate how much SMI you get each month. The loan rate can change up to twice a year, and interest is added until the loan is repaid when you sell or transfer the home.

Is an SMI loan worth taking?

For most homeowners on Universal Credit, yes. It needs no credit check, costs less than unsecured borrowing, is paid straight to your lender, and any balance not covered by equity on a sale is written off. It is less useful if you expect to be back in work within weeks or a lender arrangement already covers the gap.

Does SMI cover the whole mortgage payment?

No. SMI pays interest only, on up to £200,000 of borrowing, at the 3.66% standard rate rather than your actual rate. On a £180,000 repayment mortgage costing £1,105 a month, SMI pays £549, leaving £556 to find. That gap is why most people pair SMI with a lender arrangement.

Will my lender repossess my home if I cannot pay while on Universal Credit?

Repossession is a last resort. Lenders signed up to the Mortgage Charter have agreed not to repossess within 12 months of the first missed payment without your consent, except in exceptional cases, and FCA rules require them to explore forbearance first. Contact your lender early, apply for SMI after 3 months, and get free debt advice if arrears build.

Talk to Knox about what happens next

Your lender and the DWP handle the immediate problem. We help with the next one: a fixed rate ending while your income is lower, a remortgage once you are back in work, or restructuring debt without damaging your credit file further. Knox Mortgages is a whole-of-market broker, so we compare product transfers against the full market and tell you honestly when staying put is the better option. Book a free discovery call and we will look at your numbers.

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Your home may be repossessed if you don’t keep up repayments on your mortgage.

Knox Mortgages is a trading style of Fort Advice Bureau which is regulated and authorised by the FCA to conduct Mortgage and Protection business, FRN: 972730