Mortgages For Borrowers With a Disability

If you claim disability benefits, you can still get approved for a mortgage. But be prepared. The process is unlikely to be straightforward.

Anti-discrimination laws prevent lenders from turning you down on the basis you’re ill or disabled. Lenders are also not allowed to charge you more for a mortgage via a larger deposit, higher monthly repayments or a higher interest rate. They must treat you the same as any other applicant.

That means assessing you based on their standard criteria, which includes your financial situation.

Suppose you rely fully on disability benefits for your income. In that case, you may struggle to get a mortgage as lenders will be concerned you won’t be able to afford your repayments if your benefits stop or interest rates rise. It’s not impossible to get approved, however. Some specialist lenders will still consider your application.

You should have less trouble getting approved if your income comes only partially from your benefits. However, your choice of lender may be a bit more limited as not all mortgage providers accept disability benefits as declarable income.

Most lenders consider Disability Living Allowance (DLA) or Personal Independence Payment (PIP) as acceptable sources of income for affordability purposes. These benefits are awarded to people with a long-term physical or mental health condition or disability, so recipients will likely receive them throughout their lives.

(NB: PIP is gradually replacing DLA for people aged 16 and over.) 

Lenders will also consider a range of other benefits, including:

• Jobseekers Allowance
• Universal Credit
• Child Benefit
• Child Tax Credit
• Widow’s Pension
• Working Tax Credit
• Attendance Allowance
• Maternity Pay
• Pension Credits
• Carers Allowance

In our guide to getting a mortgage on benefits, you can read more about declaring the above on a mortgage application.

Suppose you have a short-term illness or disability that you’re expected to recover from and, therefore, are relying on short-term disability benefits for your income. In that case, you’ll find getting approved for a mortgage trickier.

Lenders can’t be assured how long this extra income will last and whether you can afford your mortgage when the additional payments stop.

If you are unemployed or have reached State Pension Age, you may be able to claim Support for Mortgage Interest (SMI). This loan will need to be repaid when you sell or transfer ownership of your home.

You can only use the loan to pay off the interest on your mortgage, not the capital borrowed, and you must receive one of the following benefits to qualify: Income Support, Jobseeker’s Allowance, Employment and Support Allowance, Universal Credit or Pension Credit.

If you become disabled and struggle to pay your mortgage, the first thing you should do is inform your lender. Depending on the circumstances, they may consider a number of options.

For example, they may let you take a break from paying your mortgage, pay less for a certain period of time, repay your mortgage over a longer period, or switch to a cheaper mortgage.

You should also find out what benefits you’re entitled to.

You can still get a mortgage if you claim disability benefits and have bad credit. It may, however, impact the range of deals available to you.

It may be worth seeking advice from a broker who specialises in securing loans for people with adverse credit.

Our network includes advisors with experience in dealing with people with complex incomes and bad credit, so we can help you find a broker who’s the perfect fit for a case like this.