Can you get a mortgage when you are on benefits in the UK? Yes, you can, here is how:
As mortgage brokers, we often get asked, “Can I get a mortgage on benefits?” “Will mortgage lenders accept benefits?” “Will a mortgage lender accept benefit income for mortgage repayments?”.
Speak with a Loan Corp expert if you want a mortgage that considers benefits. We can help you get approved by lenders who accept people who are on benefits for UK property mortgages.
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What if I am on benefits and can’t get a mortgage?
It is possible to get a mortgage even if you are receiving benefits. Your chances of getting approved for a mortgage depend on whether you have any other income or assets. You should also find the right lender for your mortgage because some lenders might not accept your benefits income, while others may only take a certain percentage.
A mortgage broker specialising in this type of lending is the best way to determine if you are eligible for a mortgage based on your income. They will not only be able to tell you which lenders will accept your application, but they will also negotiate the best rates for you.
Begin your mortgage on benefits journey below:
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What does it mean to get a mortgage on my benefits?
You might have fewer lenders to choose from, and they will likely be more concerned about your income. Lenders will evaluate a mortgage request. One of their main concerns is your affordability for mortgage repayments and the stability of your earnings.
People on benefits should be able to obtain a mortgage as long as they can show that they can afford the loan repayments for the term.
Mortgage lenders typically limit loan amounts to 4.5x your annual earnings. If you make £18,000 per year as a worker and also receive £3,000 in disability benefits each year, then the maximum loan most lenders will give you is £94,000.
Lenders cannot discriminate against people who are receiving benefits. Lenders cannot deny your mortgage application or demand a higher deposit if you are disabled or have a long-term condition. However, potential problems depend on your benefits or how long they will last.
Before you apply, make sure to consult with an expert mortgage advisor if any of the above applies to your situation.
- Benefits account for more than half of your income
- A single income source or a low income.
- You have poor credit, and you are receiving benefits
- A mortgage has been declined
Can I get a mortgage based on my benefits?
Although this is possible, it can prove difficult due to the limited number of available lenders. Potential borrowers with bad credit histories are often treated with caution by mortgage providers. Seeking specialist advice becomes even greater if you add benefit income.
There are mortgage lenders that can work with customers with poor credit histories. It depends on the time and severity of the incident.
Even if a lender is willing to consider you based on your credit score alone, the type and amount of benefits that you receive will play a significant role.
What if I have a low income?
Some brokers and lenders specialise in low-income mortgages. They may be able to consider an application that includes personal income and benefits if the circumstances are right.
When it comes to mortgages, income is essential. Many believe they won’t qualify if they have a low income. It’s possible to obtain a low-income mortgage, although it may be more difficult.
Many lenders will consider all financial sources when considering your loan application.
Even if your income is low and you receive benefits, you might be eligible for a mortgage if you can show that you are financially capable. It all depends on your benefits and how long your payments are guaranteed.
Can I get a mortgage if I have disability benefits?
Yes, mortgages are available with disability benefits. However, the lender will need to verify the borrower’s financial ability.
Many lenders will consider you if you have a long-term disability. They will also accept benefits payments if you can show that they will continue in the foreseeable future and you have met their other requirements.
You might also be interested in HOLD if you have a long-term disability. This shared ownership scheme is part of the government’s affordable housing program. Getting a mortgage can be more challenging if you are a person with a disability or short-term illness.
Lenders don’t guarantee your long-term financial viability. These benefits are not guaranteed to last or when you will return to work, and how they will affect your finances.
Are you eligible to get a mortgage through Jobseeker’s Allowance?
Yes. You may be eligible for mortgage options. You may be eligible to receive support mortgage interest (SMI) from the Department of Work and Pensions (DWP) if you own your home or wish to purchase more.
Although the DWP charges interest, it is likely to charge less than other options. The loan must be repaid, but typically only if the property is sold or given to a relative.
Is child benefit considered income when you apply for a mortgage?
Yes. Many mortgage lenders will consider child benefits when determining your ability to afford a mortgage. Not all lenders will, however.
You may be eligible to receive child benefit money. However, a lender might not approve your application if you don’t meet their other criteria. The lender must also verify that you have sufficient income to pay your monthly mortgage payment.
Is child tax benefit considered income when you apply for a mortgage?
Potentially. Some mortgage lenders will consider child benefits and tax credits in assessing your ability to afford a mortgage. However, this often depends on your children’s age and how many you have.
Lenders may only consider these benefits a portion of your total income. They might not include 100% of what you receive.
A lender might include child and tax benefits in their affordability analysis but only add 60% to the total amount.
Our expert brokers have access to lenders throughout the UK. They have the experience, knowledge and access to determine which lenders will accept benefits income as part of your affordability assessment.
They will do everything possible to find the right mortgage for you at the best price, start your mortgage application below now:
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What are the benefits of a shared ownership mortgage?
Most lenders won’t allow you to declare these benefits on your application, you’ll need other income.
Although you shouldn’t be denied a Shared Ownership mortgage because you are on benefits, it will not affect your affordability.
What benefits are required to get a mortgage for a buy-to-let property?
Some providers will consider state benefits when determining your affordability if you plan to use your benefit income for a buy-to-let mortgage.
You will likely be restricted by choice of providers. The odds of you being approved are generally higher if your benefit income is indefinitely stable.
What tax benefits can I expect from a buy-to-let mortgage?
Since April 2017, the buy-to-let tax relief benefits are gradually being phased out. New tax rules will take the form of tax credit based on 20% of your mortgage payments.
Although the change is slowly being implemented, mortgage interest will be eligible for the tax credit starting in 2020. This change will significantly impact your tax bill if you are a taxpayer at a higher rate and have previously received the tax credit.
What other benefits are considered income when you apply for a mortgage
When calculating your mortgage affordability, many lenders will take into consideration the following government benefits:
- 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
All providers may not offer these allowances. These benefits will not be accepted if you are also employed or retired.
Remember that even though the benefits you receive are considered acceptable income by a lender, it does not guarantee mortgage approval.
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If I claim Universal Credit, can I get a mortgage?
Although some lenders may accept Universal Credit as income for a mortgage application, they will not approve your application unless you have additional income sources or assets that can boost your earnings above the required amount. Universal Credit is available to both those with low incomes and those who are not employed.
A mortgage broker specialising in Universal Credit applications and clients on benefits is your best option if you want to obtain a mortgage.
They will be able to tell you which mortgage lenders can help you and which ones will allow you to declare all of your income.
Suppose you are a homeowner with a mortgage and have Universal Credit. In that case, you may be eligible for Support for Mortgage Interest (SMI), a repayment table loan that can be used to pay your mortgage interest.
What is the maximum amount of mortgage you can get for benefits?
This case-by-case situation will depend on your circumstances, income, and affordability.
How to get a mortgage with UK benefits
It is essential to prepare before you fill out and submit your application if you are eligible to use your benefits for your mortgage payment.
These are some of the factors to consider:
How much do you have to spend?
You must meet the affordability criteria of potential lenders. They want to ensure that you can keep up with your repayments so that they will examine your ratio of debt-to-income (DTI).
Make a monthly budget to show your income and expenses before applying. This will help you determine if you can meet the minimum financial requirements for your loan request.
What happens if your circumstances change?
Lenders will assess your ability to pay your mortgage payments. Consider the following when applying for a mortgage based on benefits:
- If your partner lost their job, could you still make the payments? (if applicable)
- What would happen to your financial situation if your benefits were cut or discontinued altogether?
You can take out mortgage payment security insurance to help you avoid this situation. Or, you can start saving for an emergency fund that you can access in case of need.
Are your papers in order?
It can be challenging to get a mortgage. You can speed up the process and ensure that things run smoothly by having all your paperwork prepared (e.g. bank statements).
All bank statements and other documentation proving income are required. Also, include details about how much you are receiving or due to receive in benefits.
What benefits do mortgage lenders accept?
We’ve shown that there are many benefits mortgage lenders will consider, some more acceptable than others, such as long-term disability benefits.
Some banks on the high street accept disability benefits.
Talk to an expert to learn more about using benefits to pay your mortgage.
Click the link below to speak with an expert mortgage broker who will answer any questions you have free of charge.
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