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HomeMortgage Help GuidesHow to get a mortgage on benefits

How to get a mortgage on benefits

Last updated on 4th September 2023 by Martin Alexander

This guide will explain how you can apply for a mortgage on benefits. Whether your benefits are paid as a top-up to your salary or you solely rely on benefits, we’ll discuss the options available.

Claiming benefits shouldn’t stop you from getting a mortgage. Nonetheless, you’ll still need a careful approach, as not every lender will accept applicants on benefits. Furthermore, the way benefits are assessed varies from lender to lender.

In recent years, the pandemic caused economic chaos, affecting many jobs throughout the UK. As a result, the UK government introduced help in the form of grants and benefits to help those with affected salaries. This is why the number of homeowners claiming benefits is high compared to previous years. Mortgage lenders also realise this, and many have adapted their approach.

Many benefits have also been replaced with Universal Credit. In fact, there are currently over six million Universal Credit claimants in the UK. We’ll discuss each benefit in detail and whether getting a mortgage is possible. Our experts are also available to help you further if needed.

Can I get a mortgage on benefits?

The short answer is yes, getting a mortgage while claiming benefits is possible. Many types of benefits are available, each impacting your mortgage differently.

Being employed and receiving benefits can support your application, as well as having assets and savings.

Employed and claiming benefits

If you’re working and claiming benefits, there are certainly more mortgage lenders to approach. This can make mortgage approval easier, as you’ll have more options.

You’ll still need to meet your lender’s criteria, so having a good credit score and income will help. The advantage here is that the benefits you’re receiving can boost your borrowing power. Lenders will use your salary plus the income from your benefits to calculate your overall income, allowing you to borrow more than usual.

Unemployed and claiming benefits

It’s possible to get a mortgage if you’re unemployed and claiming benefits, but only under certain circumstances.

Mortgage approval won’t be easy, and your options will be limited. This is because there aren’t many lenders willing to lend to unemployed applicants, even if you can afford to repay the mortgage with the benefits you receive.

The good news is that there are lenders who will consider you. Furthermore, benefits can be used towards your income and affordability assessment. Depending on your income, a mortgage may well be possible.

Low income and claiming benefits

Getting a mortgage with a low income is possible. In fact, using benefits towards your mortgage application when you have a low income can be helpful. This is because the income from your benefits can provide a top-up to your income, allowing you to borrow more.

Lenders will also assess your income each time you apply for a mortgage. Typically, the more you earn, the more you can borrow. That said, if you’re currently earning a lower-than-usual income, lenders may assess your savings, assets and benefits you receive to make their final decision.

How do benefits affect a mortgage application?

Claiming benefits can affect your mortgage application in both a positive and negative way. For instance, you can use the income from your benefits to help support your application, but some lenders may not include benefits as part of their criteria.

Positive factors

  • Boost your borrowing power
  • Ideal for low-income households
  • Use benefits alongside schemes such as Shared Ownership
  • Support towards affordability

Negative factors

  • Not all lenders will include income from benefits
  • Some lenders won’t accept certain benefits
  • You can appear high risk if you’re dependent on benefits
  • Underwriters will investigate deeper into your application
  • Limited amount of lenders

Can I get a mortgage on disability benefits?

There are mortgages for those receiving disability benefits, but lenders are limited. Passing a lender’s affordability check can be difficult without a sufficient income.

Nonetheless, with a well-packaged application, you can show lenders that you’ve received disability benefits, especially if you suffer from a long-term disability. This is because lenders can agree that your disability benefits will likely continue, allowing you to repay your mortgage.

If you have a short-term illness or disability that you’re likely to recover from, mortgage approval can become difficult. This is because the income from your disability benefits can stop, making mortgage repayments difficult. Lenders will need to know if you’re possibly returning to work and the duration of how long your benefits are likely to last.

Home Ownership for People with Long-term Disabilities (HOLD)

If you suffer from a long-term disability, you may be eligible for the HOLD scheme. HOLD is a government-backed scheme similar to the shared ownership scheme.

The scheme allows you to part-rent and part-buy your home, owning between 10% and 75% of the property and paying rent on the remainder.

Learn more about the HOLD scheme here.

Can I get a mortgage on Jobseeker’s Allowance?

Yes, some lenders accept applicants receiving Jobseeker’s Allowance (JSA). However, if you’ve been claiming JSA for over a year, mortgage approval can be difficult. This is because you may appear overly dependent on the income you receive from benefits.

If you already have a mortgage, the Department of Work and Pensions (DWP) offers support for mortgage interest (SMI). This is to help with your mortgage payments while you’re not in full-time employment. You will be charged interest, so check the terms and conditions with the DWP beforehand. Our experts can also help you with this.

What if I receive child benefit?

Using child benefit towards your mortgage application is often advised. This is because it can increase your income, ultimately increasing the amount you can borrow.

With this in mind, not every lender will count child benefits towards your income. Other lenders will only use a percentage of the child benefits you receive. If you receive child benefits and want to maximise your borrowing power, you must ensure your lender includes 100% of your child benefits towards your income.

Under no circumstances should a lender penalise you for claiming child benefit, so you should always declare this. It can only become an issue if you have no other income, such as a salary or income from other benefits. Lenders will also assess the ages of your children and the number of children you have during your mortgage assessment.

Can I get a mortgage with Universal Credit?

It’s possible to get a mortgage with Universal Credit, but other factors will influence a lender’s decision.

Lenders will assess the following:

  • Whether you have other income or assets – Additional income and assets will support your application.
  • Your deposit amount – Higher deposits, such as 20% or more, can help your application, but 5-10% deposits will be difficult.
  • Dependency on Universal Credit – If your income is mainly from Universal Credit, lenders will question your ability to repay a mortgage.
  • Any other benefits you’re claiming – Claiming other benefits can help your application, but only with lenders that include income from benefits.
  • The type of mortgage you’re applying for – Certain mortgages may be easier, such as buy-to-let, where certain lenders don’t have any minimum income requirements.

My only income is from Universal Credit

If you claim Universal Credit, you’ll likely have a low income or be unemployed. Getting a mortgage under these circumstances can be difficult, but it may still be possible.

To improve your chances, speak to a mortgage advisor who can better assess your situation. We’ll then search for potential lenders, as you’ll be classed as a high-risk applicant. Applying with lenders yourself could result in you being declined.

What benefits can be used for a mortgage?

The following government benefits can be used towards an income for a mortgage:

  • Attendance Allowance
  • Carers Allowance
  • Child Benefit
  • Child Tax Credit
  • Disability Living Allowance (DLA)
  • Housing Benefit
  • Incapacity Benefit (IB)
  • Industrial Injuries Benefit (IIB)
  • Maternity Pay
  • Pension Credits
  • Severe Disablement Allowance
  • Universal Credit
  • Widow’s Pensions
  • Working Tax Credit

It’s important to note that each lender has a unique mortgage assessment. Some underwriters won’t include certain benefits in their assessments, and others will.

Which mortgage lenders accept benefits?

Not all lenders will accept benefits, and those that do aren’t always easy to find. Some high-street lenders will accept benefits as part of their mortgage assessment but often require other forms of income, either from work or investments.

It’s also easier to be accepted if you’re claiming certain benefits. For instance, if you’re suffering from a long-term disability, lenders will be more inclined to accept income from disability benefits. This is because it’s likely to be long-term and can support mortgage payments.

Mortgage lenders can’t discriminate against applicants claiming benefits. As a result, lenders won’t decline your application solely based on the benefits you’re claiming. Furthermore, lenders aren’t able to offer you a mortgage in return for higher rates and fees because you receive benefits. That being said, lenders can decline your application if your income doesn’t suit the mortgage you’ve applied for.

How much can I borrow on benefits?

The amount you can borrow will depend on the lender you’ve applied with. This is because each lender has an affordability system. Furthermore, other factors will affect the amount you can borrow, such as your credit score and deposit amount.

With that in mind, most lenders offer maximum amounts between three and five times your annual income. However, it can get tricky because some lenders only use a capped percentage of your benefit income, and others don’t include income from benefits at all.

For instance, if you earn £20,000 a year and receive £5000 in benefits, lenders may offer you a maximum of between £75,000 and £125,000. That’s if they include your income from benefits in your assessment, as not all will.

Use our mortgage affordability calculator here.

How can I get a mortgage on benefits?

To improve your chances of getting a mortgage on benefits, you can do the following:

  • Save for a higher deposit
  • Get an Agreement in Principle (AIP)
  • Show evidence that you can repay a mortgage
  • Reduce your debt

Save for a higher deposit

The most effective way to boost your mortgage chances is to save as much as possible for a deposit. Those with 5% deposits will be deemed high-risk, and if you’re claiming benefits, you’ll already be in a high-risk bracket. This is why saving as much as possible is advised before applying.

Using a higher deposit can often unlock better rates, and although it may take longer, doing so can save you money overall.

Get an Agreement in Principle (AIP)

An Agreement in Principle is a perfect way to start your homebuying journey. You’ll be given a budget to work towards, and you’ll have more confidence in viewing properties as you’ll know exactly how much a lender will likely lend to you.

We recommend you speak to an advisor before applying for an AIP. Applying with unsuitable lenders could leave a footprint on your credit file, lowering your credit score if rejected.

Show evidence that you can repay a mortgage

If you fall short on an affordability assessment, your mortgage will be declined or offered less. Documenting your income and preparing your bank accounts can work wonders toward your mortgage.

Showcase your income in its best possible light before applying for a mortgage. You can also note your income, including the benefits you receive, and then calculate what you spend each month. This can include monthly subscriptions and payments. You can then calculate what you have each month and whether you can repay a mortgage. Our experts can also do this for you.

Reduce your debt

Reducing your debt can improve your mortgage chances. Having a lot of debt before you get a mortgage is rarely advised. In contrast, minimising your debt as much as possible can help your application, as doing so can reduce your monthly outgoings.

Having large monthly outgoings for existing debt can work against you. This is because lenders need to be sure you have enough income each month to repay your mortgage.

Can I get a mortgage on benefits with bad credit?

Having bad credit will make mortgage approval difficult. As you’re claiming benefits, lenders will already view you as a high-risk applicant. Once you add bad credit to your application, your level of risk becomes extremely high, and some lenders will decline you.

You’ll certainly need specialist mortgage advice and possibly a specialist mortgage lender. Many high-street lenders don’t accept bad credit, even from those earning good salaries.

The specialist lenders that we work with will check the dates and severity of your credit issues. Historic issues will have less impact, whereas recent credit problems will limit your mortgage chances.

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

It’s possible to get a buy-to-let mortgage on benefits. Some buy to let lenders don’t have minimum income requirements and base their assessment on whether the rental income is enough to repay the mortgage. For this reason, you’ll need to ensure the rental income is at least 125% of the mortgage. Some lenders may require your rental income to be 140% of the mortgage.

You’ll also need a minimum 25% deposit. You may be able to get a buy-to-let mortgage with a smaller deposit, but if the majority of your income is from benefits, you will struggle.

Being an existing landlord can help your application. This is because you’ll have income from your investment properties and the benefits you receive.

How can I get mortgage advice for benefits?

It’s always recommended to get expert advice before applying for a mortgage. This is especially true if you claim benefits, as an experienced advisor can guide you through what’s possible and which lenders are suitable, if any.

You’ll certainly need to speak to an expert if:

  • Over 50% of your income comes from benefits
  • You have bad credit
  • You’re on a low income or unemployed
  • You’ve already been declined
  • Your benefits are set to end soon
  • You wish to use benefits on your application

You can make an enquiry online or call us on 0800 195 0490 to speak to an expert.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.