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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 25th August 2020*

In this article, we’ll be discussing how to get a mortgage if you’re on benefits in more depth, including:

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, it is certainly possible for people on benefits to get a mortgage. However, you need to be aware of the different variables at play, as they can impact what mortgage you’ll be able to get, or if you’re eligible.

Whether your application is approved is very much case-dependent, and lenders will want to know a lot more about your specific circumstances before deciding if the income you receive through benefits can be used for mortgage payments.

How does getting a mortgage on benefits impact my application?

When lenders assess a mortgage application, one of their biggest concerns is your affordability and the stability of your income.

So, 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 reject your 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?

Mortgage providers tend to treat prospective borrowers with a history of bad credit with caution. However, some are more lenient than others. Often, it depends how long ago the instance(s) occurred, and / or the severity of the issue.

However, 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?

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.

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.

Can I get a mortgage on disability benefits?

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?

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?

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?

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?

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?

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
  • Child Tax Credit
  • Disability Living Allowance (DLA)
  • Incapacity Benefit (IB)
  • Industrial Injuries Benefit (IIB)
  • Maternity Allowance
  • Pension Credit
  • Severe Disablement Allowance
  • Widow’s Pension
  • Working tax credit

Universal credit is also being introduced in stages across the UK to help people with mortgages and other living costs, but if you currently receive certain other benefits, you cannot claim Universal Credit at the same time.

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.

The best way to identify 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.

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.

Updated: 25th August 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of 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 info 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.