Getting a Mortgage on Benefits

How does it work?

Most mortgage providers cap the number of benefits that can be included in your affordability assessment. Still, a handful may consider applications from borrowers whose income is primarily benefits if other criteria are met (for example, a large deposit).

If your income varies, it may impact the benefits you receive (like Universal Credit), which could lead lenders to assess your application less favourably. Additionally, the housing element of Universal Credit is excluded from income calculations, as it would cease with mortgage approval.

One of the things lenders are looking for when assessing affordability is longevity. So, for example, if you are receiving DLA (Disability Living Allowance) for a permanent disability, from a lender’s perspective, this is stable income. Those with a short-term illness who are expected to return to work may be seen as having a higher lending risk.

Likewise, if you receive child benefits but these are due to end soon, providers may not include them as income when assessing affordability.

What types of benefits are acceptable?

The list of benefits that can be accepted as part of a mortgage application includes (but is not limited to):

• Personal Independence Payments (PIP)
• Attendance allowance
• Carers Allowance
• Child Benefit
• Child Tax Credit
• Disability Living Allowance (DLA)
• Incapacity Benefit (IB)
• Industrial Industries Benefit (IIB)
• Maternity Allowance
• Pension Credit
• Universal Credit
• Widow’s Pension

Note: The housing element of any Universal Credit received will not be included as income as it will cease once you get a mortgage. It’s important to stress that all lenders accept every type of benefit equally. How much lenders are willing to loan to you will depend on each lender’s criteria.

not all benefits are acceptable to all lenders, and you must pass affordability and eligibility checks to get approved.

How to get a mortgage on benefits

Follow these steps to maximise your chances of approval:

Get together details of all your income

This should include salary, benefits, child maintenance, and any other income you receive. Ideally, you should have payslips, official confirmation of each source of income, and bank statements proving receipt.

Don’t worry too much if a couple of items are missing. Your broker will advise you on what to do in this case.

Work out a budget and save for a deposit

This is crucial if you’re looking for a low-income mortgage.

It will help you understand how much you can afford to pay and identify unnecessary expenses, such as subscriptions you don’t use.

While saving for a deposit could be difficult in these circumstances, the more you have, the better your chances of approval.

Monitor your credit reports

Make sure all credit payments are up to date, and check your credit files for any inaccuracies or out-of-date information. If you spot anything, you should take steps to have it removed. You can download your credit files for free for a limited period by clicking here.

Speak to a broker who specialises in mortgages for people on benefits

Once you’ve checked your credit reports and saved for a deposit, the next logical step is to speak with a mortgage broker. They will be able to identify the mortgage lenders who are more willing to help.

The brokers we work with have whole market access and insider knowledge of getting a mortgage on benefits. This means they can quickly find the best provider in the country to match your situation and help you package your application to get it approved.

Which lenders accept benefit income?

There are a few lenders who will accept benefit income, including major high street banks such as:

• Barclays
• Halifax
• Santander

However, each has its eligibility criteria, and not all accept every type of benefit.

This is why it’s best to speak to a broker who knows each provider’s attitude to including benefits as part of your income and can ensure you maximise your borrowing power.

What’s the maximum amount you can borrow?

Some lenders cap lending for people on benefits at £250,000.

Regardless of any loan amount, the maximum amount you can borrow is calculated by multiplying your total annual income (according to the lender’s criteria) by the providers’ income multiple. Typically, this is between 3 and 4.5 times income.

As an example, at 4.5 times your income on a salary of £20,000 and acceptable benefit payments of £6,000, the maximum amount you could borrow (subject to meeting all other criteria) would be £117,000 (£26,000 x 4.5).

To determine how much you can borrow, enter your declarable income from all sources into our mortgage calculator.

Are there government schemes to help people on benefits get a mortgage?

Yes. There are several government schemes designed to help people into home ownership. Your broker will help you decide which, if any, is best for you.

These include:

• The mortgage guarantee scheme is aimed at those with a 5% deposit looking for a 95% mortgage (available until June 2025)
• Right to buy for those living in a local authority property
• Right to acquire for housing association tenants
• Shared ownership, which lets you part buy and continue to pay rent on the rest of the property (Note: Some lenders may include benefit income in affordability calculations, others may not, based on individual circumstances.)
• Home Ownership for People with Long-term Disabilities (HOLD) scheme, which is similar to shared ownership

What to do if you have gone onto benefits while you already have a mortgage

If you have an existing mortgage and are now receiving Universal Credit, you may be eligible for government support through the Support for Mortgage Interest (SMI) scheme. The SMI scheme is a loan which you’ll need to repay with interest when you sell your property or transfer ownership.

If you’re still receiving benefits when it comes to remortgaging, you should speak to a remortgage broker to make sure you get the best deal available, as you may no longer meet the criteria for your current lender.

Get matched with a broker experienced in dealing with benefits income

Getting a mortgage on benefits doesn’t need to be stressful. With an experienced broker onside, you can apply with confidence. They’ll find the right lender and best product for you – and guide you through the buying process.

We will match you with an expert broker who has a track record of securing great mortgage deals for people in your situation.

To get matched with your ideal broker, call 0330 818 7026 or enquire online.