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Mortgage on Benefits

See how expert advice could help secure your mortgage whilst using benefits income

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: July 13, 2021

In this article, we’ll be discussing how to get a mortgage if you’re on benefits in more depth. UPDATE 22/01/2021: Many of the benefits discussed in this article have since been replaced by Universal Credit for most people, but the information we’ve given still applies. We’ve also added a section about getting a mortgage while claiming Universal Credit to summarise how lenders treat this benefit.

If you’re looking for a mortgage which takes benefits into account or simply want more information, speak with an independent broker, like the ones we work with. Not you’ll not only get great tailored advice – you’ll also get the best deals for your circumstances.

Can I get a mortgage if I’m on benefits?

Yes! Getting a mortgage while on benefits is certainly possible under the right circumstances. The chances of your application being approved are likely to hinge on whether you have other income or assets in addition to the money you’re getting through benefits. It’s also vital to find the right mortgage lender as some might only accept a capped percentage of your benefit income, and others none at all.

The best way to find out whether you’re eligible for a mortgage based on your benefit income is to speak to a mortgage broker who specialises in this type of application. Not only will they be able to tell you which lenders will accept you, they will negotiate the best rates on your behalf, help you with any paperwork and offer bespoke advice about how to make your income go further.

Make an enquiry with us and we’ll match you with a mortgage broker who specialises in customers with benefit income today.

Mortgage Lenders for Benefits income

Showing a range of the latest UK mortgages from lenders considering people with benefits income. Updated as of June 2021

Mortgage amount £150,000, over 30 years

17

Lenders

Mortgage Lender #1

£576

Monthly payment

95%

Maximum LTV

3.05% 3 year discounted

Initial rate

£199

Product fees

4.9% APRC

Overall cost for comparison

Mortgage Lender #2

£664

Monthly payment

95%

Maximum LTV

3.39% lifetime discounted

Initial rate

£0

Product fees

3.5% APRC

Overall cost for comparison

Mortgage Lender #3

£636

Monthly payment

90%

Maximum LTV

3.05% 3 year discounted

Initial rate

£199

Product fees

4.9% APRC

Overall cost for comparison

Mortgage Lender #4

£685

Monthly payment

90%

Maximum LTV

3.64% 5 year fixed

Initial rate

£774

Product fees

4.2% APRC

Overall cost for comparison

Mortgage Lender #6

£879

Monthly payment

75%

Maximum LTV

5.79% 2 year fixed

Initial rate

£0

Product fees

4.9% APRC

Overall cost for comparison

How does getting a mortgage on benefits impact my application?

Your choice of approachable lenders might be fewer and you can expect more scrutiny around your income. When lenders assess a mortgage application, one of their biggest concerns is your affordability and the stability of your income.

As long as you can prove that you can afford to keep up with your loan repayments over the specified term, there’s no reason why people on benefits shouldn’t be able to get a mortgage.

Typically, mortgage lenders cap the loan amounts at 4.5x your annual income. So say you earn £18,000 a year from employment and receive an additional £3,000 in disability benefits, the maximum loan most providers will offer you is £94,500.

Lenders are not allowed to discriminate if you’re receiving benefits. So for example, if you’re disabled for life or suffering from a long-term illness, they cannot legally decline your mortgage application, offer higher interest rates or insist on a larger deposit on this basis alone.

That being said, problems can arise depending on the type of benefits you receive or if there is uncertainty surrounding how long you’ll be receiving benefits for.

Can I get a mortgage on benefits with bad credit?

This is potentially possible, but can be more difficult since the amount of approachable lenders will be even slimmer. Mortgage providers tend to treat prospective borrowers with a history of bad credit with caution, so if you throw benefit income into the equation, the need for specialist advice is even higher.

However, there are bad credit mortgage lenders who can be very flexible when it comes to customers with adverse, regardless of their background. Often, it depends how long ago the instance(s) occurred, and / or the severity of the issue.

Even if a lender is happy to consider you based on your credit score, the type of benefits will be a key factor. We’ll be covering which types of benefits tend to be more acceptable to mortgage lenders later on.

Can I get a mortgage if I have a low income and receive benefits?

Yes. There are lenders and brokers who specialise in low-income mortgages and they could potentially considering an application comprised of personal income and benefits, under the right circumstances.

Income is a big factor when it comes to mortgages, and many people believe that if they’re on a low income they won’t be eligible. While it can be more difficult, it’s not impossible to get a low-income mortgage.

As mentioned, many lenders are happy to consider different types of financial sources when evaluating your loan application. So even if you have a low-income job and also receive benefits, if you can prove your affordability you may be able to secure a mortgage.

Again, it all depends on the type of benefits you’re receiving, and for how long your payments are guaranteed for.

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Can I get a mortgage on disability benefits?

Yes, there are mortgages for people on disabled benefits but expect the mortgage lender to be stringent with their affordability checks.

If you’re suffering from a long-term disability and want to get a mortgage, many lenders will accept benefit payments provided you can prove that they will continue for the foreseeable future, and assuming you meet their other requirements.

If you have a long-term disability, you could also consider looking into HOLD, a shared ownership scheme which is part of the government’s affordable housing programme.

It can be slightly more challenging to secure a mortgage if you’re suffering from a short-term illness or disability and are using benefits to supplement your income on a loan application.

This is because lenders have no guarantee of your long-term affordability, i.e. how long these benefits will last, or when you’ll be returning to work (if applicable), and how that will impact your finances.

Can you get a mortgage on Jobseeker’s Allowance?

Yes. There could be mortgage options for you. If you receive Jobseeker’s Allowance (JSA), you may be eligible for support for mortgage interest (SMI) from the Department of Work and Pensions (DWP) if you own your own home, wish to buy more of your home, or are part of a shared ownership scheme.

The DWP will charge you interest, but it is likely to be at a cheaper rate than many alternatives. You will need to repay the loan, but usually only when you sell it or give the property away to a family member.

Does child benefit count as income for a mortgage?

Yes. Many mortgage providers will, in some circumstances, take child benefit into account when assessing your affordability for a mortgage. However, not all lenders will.

The money you get from claiming child benefit could be included in the decision as to whether a lender is willing to approve your application, but you’ll need to pass their other criteria too and have enough income to give the lender confidence that you can afford your monthly mortgage payments.

Does child tax benefit count as income for a mortgage?

Potentially. Although there are mortgage lenders who will consider including child benefit and child tax credits when they assess your affordability for a mortgage, it’s often very much dependent on how old your children are and how many children you have.

Some lenders will only consider these benefits as a percentage of the whole income amount, rather than including 100% of the benefit you receive. For example, a lender may include child benefit and child tax benefit in their affordability assessment but only add 60% of the whole amount in their calculations.

All the experts we work with are whole-of-market brokers with access to mortgage lenders across the whole UK. They have the knowledge, experience and tools to know which lenders will accept benefit income as part of your affordability assessment. They will work to ensure they find you the right mortgage at the best available price.

Can I get a shared ownership mortgage on benefits?

Yes, but most lenders won’t let you declare those benefits on your application, so you’ll likely need to have other income as well.

While being on benefits shouldn’t stop you from being able to get a Shared Ownership mortgage, the benefit income you receive will not be counted towards your affordability when lenders assess your application.

Can I get a buy-to-let mortgage on benefits?

Yes. Some buy-to-let lenders may base your mortgage application on your ‘ability to pay’, which is calculated by looking at all sources of your income including benefits, although they tend to have far stricter affordability requirements.

If you want to use your benefit income towards a buy-to-let mortgage, some providers will take some state benefits into account when assessing your affordability. However, it’s likely you’ll be limited by choice of providers.

Generally speaking, the more indefinitely sustainable your benefit income is likely to be, the better chance you have of being approved.

What tax benefits could I get with a buy-to-let mortgage?

Buy-to-let tax relief benefits have been gradually phased out since April 2017. From April 2020, it will no longer be possible to deduct any of your buy-to-let mortgage costs from your rental income.

The new tax rules will be in the form of a tax-credit, based on 20% of your mortgage interest payments.

The change is being implemented gradually but as of 2020, all mortgage interest will only receive the tax credit. If you’re a higher rate taxpayer and have previously benefited from the system being phased out, this change will make quite a big difference to your tax bill.

What other benefits count as income for a mortgage?

Many lenders are happy to take the following government benefits into account when they calculate your mortgage affordability:

  • Attendance Allowance
  • Carers Allowance
  • Child Benefit
  • Disability Living Allowance (DLA)
  • Incapacity Benefit (IB)
  • Industrial Injuries Benefit (IIB)
  • Maternity Allowance
  • Pension Credit
  • Severe Disablement Allowance
  • Widow’s Pension
  • Housing benefits*
  • Child tax credit*

*Now replaced by Universal Credit for most people

Bear in mind that these allowances are not made by every single provider on the market. Some will only accept these benefits as a source of income if you’re also employed or retired, for example.

Also remember that even if the benefits you’re receiving are deemed an acceptable form of income by a lender, it doesn’t guarantee mortgage approval.

Important

The best way to find the most appropriate lender for you is to work with a whole-of-market broker who has extensive knowledge of lenders’ eligibility criteria and can advise on those most likely to accept taking all factors into account.

Can I get a mortgage if I’m claiming Universal Credit?

Yes, some lenders might be willing to accept Universal Credit as declarable income on a mortgage application, but approval will likely hinge on whether you have other sources of income or assets to bump your overall earnings to the necessary amount, as well as enough deposit.

Some people on low income are entitled to Universal Credit, as well as those who are unemployed. If you’re claiming this benefit while working in a low-paying job, take a look at our guide to low-income mortgages to find out what options might be available to you.

If you’re hoping to get a mortgage on Universal Credit, your best bet is to speak to a mortgage broker who specialises in applications for low-income earners and customers on benefits. They will know exactly which mortgage lenders are best positioned to help, and which ones are most likely to allow you to declare the full amount you’re claiming, in addition to any other income you might have.

Meanwhile, if you have an existing mortgage and are entitled to Universal Credit, you might also qualify for Support for Mortgage Interest (SMI), a repayable loan that can be claimed to cover your mortgage interest payments.

How much mortgage can you get on benefits?

Again, this is case-dependant, and will completely depend on your situation with regards to your benefit income, overall affordability, and other personal circumstances.

How to get a mortgage while on UK benefits

If you’re eligible to use your benefits to pay your mortgage, it’s important to be well prepared before filling out your application and submitting it.

Consider the following factors:

What is your budget?

As we’ve established, it is paramount that you meet prospective lenders’ affordability criteria. They want to be certain that you will be able to keep up with your repayments, so they will look at your debt-to-income (DTI) ratio.

Before applying, why not draw up a monthly budget detailing all forms of your income and outgoings? This can help you establish whether you can meet the minimum affordability requirements for your requested loan.

What happens if you have a change of circumstances?

When assessing your affordability, lenders will consider factors such as whether you will be able to keep up with your repayments if interest rates increased. If you’re applying for a mortgage on benefits, think about the following:

  • Could you still afford the repayments if you or your partner lost their job? (if applicable)
  • How would your financial situation be affected if your benefits were reduced or stopped altogether?

To mitigate such a situation, you could consider taking out mortgage payment protection insurance, or start paying into a savings account which you can dip into for emergencies.

Is your paperwork in order?

Getting a mortgage can be a long process and requires a lot of preparation. To help speed things along and to ensure things run efficiently, ensure to have your paperwork ready.

Gather together all your bank statements and any other documentation showing proof of income, and details of how much you’re receiving (or due to receive) in benefits.

What mortgage lenders accept benefits?

As we’ve established, there are a number of benefits that mortgage lenders will take into consideration, some of which are more acceptable than others, such as long-term disability benefits. At the time of writing, highstreet banks Nationwide, Barclays and HSBC will consider authorising a mortgage if your income is supplemented with full-term disability benefits – provided you meet their other criteria.

That being said, lenders are constantly updating their eligibility requirements, so it’s in your best interest to shop around for the most competitive rates and the most suitable mortgage provider for you.

Speak to an expert about using benefits to pay a mortgage

If you’re still unsure as to how the benefits you’re receiving will impact a mortgage application, don’t fear: this is where we come in!

The whole-of-market brokers we work with will discuss your circumstances with you, let you know your options, advise the best course of action, and identify the most suitable lenders to suit you.

Call us on 0808 189 2301, or fill in an enquiry form online and we’ll be in touch. We only work with 5* accredited brokers, we don’t charge a fee, and you’re under absolutely no obligation.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in securing mortgages for those on benefits.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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