Written by: Danny Belton - Head of Lending
Are you on benefits and looking to get on the property ladder? You might be wondering if it’s even possible to get a mortgage while being in receipt of benefits. The good news is, it is possible, under certain circumstances. Read on further for the finer details.
In this article:
How can you get a mortgage while on benefits?
What type of benefits count as income?
Can you get a mortgage while on benefits and employed?
How much can you borrow if you're on benefits?
What type of mortgage can you get on benefits?
Which mortgage schemes could help?
How can you get a mortgage while on benefits?
How can you get a mortgage while on benefits?
Yes, it is possible to get a mortgage while on certain benefits, as lenders cannot discriminate based on the source of income. Whether you have long-term disabilities or dependents, you have the same mortgage rights as others. Lenders consider your benefits as part of your regular income, which can help you secure a mortgage.
It’s worth remembering, however, that if your only form of income is your benefits, it will be much more difficult to get a mortgage than if you have other forms of income on top of your benefit payments.
To get an idea about your mortgage affordability, use our affordability calculator today.
What type of benefits count as income?
The following benefits count as additional income during a mortgage application:
- Child Benefit
- Maternity Allowance
- Carer’s Allowance
- Disability Living Allowance (DLA)
- Pension Credit
- Widow’s Pension
- Attendance Allowance
- Incapacity Benefit (IB)
- Industrial Injuries Benefit (IIB)
- Severe Disablement Allowance
On top of these benefits, if you are also claiming Universal Credit, then the following benefits included within Universal Credit payments also apply as additional income:
- Child Tax Credit
- Housing Benefit
- Income-based Job Seeker’s Allowance
- Income-related Employment and Support Allowance
- Income Support
- Working Tax Credit
Can you get a mortgage while on benefits and employed?
Yes, you can get a mortgage while on benefits and employed. Lenders consider both your employment income and benefits as part of your total income. This combined income can help you secure a mortgage even if your earnings from employment alone are low.
How much can you borrow if you're on benefits?
Typically, most lenders will lend you the amount of your income multiplied by a number (usually between 3 and 4.5). Of course, this all varies depending on the lender and type of mortgage you want to take out.
For an estimate of how much you can borrow, our borrowing amount calculator can be very handy.
What type of mortgage can you get on benefits?
As with most mortgage applicants with standard income, there is a range of different mortgage types you can get while being on benefits. These can range from your standard residential mortgages, a remortgage, buy-to-let mortgages, and interest-only mortgages.
Talk to one of our expert mortgage advisers today to find out which kinds of mortgages you would be eligible for.
Which mortgage schemes could help?
There are a few mortgage schemes that can help you if you’re looking into getting a mortgage on benefits. Shared Ownership and the Mortgage Guarantee scheme being prime examples.
Shared Ownership
Shared Ownership is a scheme that allows you to buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share, which is owned by a housing association or a private landlord. This approach makes it easier for people to get on the property ladder, especially those who cannot afford to buy a home outright. Over time, you can purchase additional shares (known as "staircasing") until you own the property outright, if you so wish. This scheme is designed to help make home ownership more accessible and affordable.
Mortgage Guarantee scheme
The Mortgage Guarantee scheme is a government initiative designed to help individuals, particularly first time buyers and those with small deposits, purchase homes by encouraging lenders to offer high loan-to-value (LTV) mortgages (91%-95%). The government provides a guarantee on the portion of the mortgage over 80%, reducing the risk for lenders.
Right to Buy
If you currently live in a council-owned property, one option available to you under the Right to Buy scheme, is buying the property from the council at a reduced figure (max discount of £102,400 outside of London, £136,400 in London).
Are there mortgage lenders that accept disability benefits?
Most lenders will accept those who are on disability benefits, providing that the total amount of your income meets their affordability criteria (usually between 3 and 4.5 times your total income - including benefits).
Frequently asked questions
Getting a mortgage while on benefits and having bad credit is challenging but not impossible. Lenders typically assess financial stability, and having bad credit can be a significant hurdle, often leading to higher interest rates or stricter mortgage terms. However, some specialised lenders or government schemes may consider your application if you demonstrate a stable income, including benefits, and the ability to manage your mortgage payments.
You can get a Shared Ownership mortgage on benefits, providing you meet the lender’s affordability criteria.
You can get a mortgage if you are on Universal Credit, providing you meet the lender’s affordability criteria.
The government may provide some assistance with mortgage payments if you are unemployed, but it won't cover the entire mortgage. Through the Support for Mortgage Interest (SMI) scheme, you can receive help with the interest payments on your mortgage, but not the repayment of the principal amount or other related costs.
You can still claim Universal Credit if you own your own home, as long as you meet the eligibility criteria for Universal Credit. Owning a property does not disqualify you from Universal Credit.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
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