Last reviewed on 4th September 2023 by Martin Alexander (Mortgage Advisor)
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 to you.
Claiming benefits isn’t something that should stop you from considering 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 which affected 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 when 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. Nonetheless, we’ll discuss each benefit in detail and whether it’s possible to get a mortgage. Our experts are also available to help you further if needed.
- Can I get a mortgage on benefits?
- How do benefits affect a mortgage application?
- Can I get a mortgage on disability benefits?
- Can I get a mortgage on Jobseeker’s Allowance?
- What if I receive child benefit?
- Can I get a mortgage with Universal Credit?
- What benefits can be used for a mortgage?
- Which mortgage lenders accept benefits?
- How much can I borrow on benefits?
- How can I get a mortgage on benefits?
- Can I get a mortgage on benefits with bad credit?
- Can I get a buy to let mortgage on benefits?
- How can I get mortgage advice for benefits?
Can I get a mortgage on benefits?
The short answer is yes, getting a mortgage while claiming benefits is possible. It certainly won’t be easy as it can be a very complex mortgage application. For instance, there are many types of benefits that are available and each one will impact your mortgage in a different way.
Being employed in addition to receiving benefits can also affect your application. Having assets and savings can also support your application.
Employed and claiming benefits
There are certainly more mortgage lenders to approach if you’re working in addition to claiming benefits. This can make mortgage approval easier, as you’ll have more options to choose from.
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. This is because lenders will use your salary plus the income from your benefits to calculate your overall income. As a result, you can borrow more than you otherwise would be able to.
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 very limited. This is because there aren’t many lenders that are 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 that will consider you. Furthermore, benefits can be used towards your income and affordability assessment. Depending on the amount of income you receive, 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 potentially 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 and assets in addition to the 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.
- Boost your borrowing power
- Ideal for low-income households
- Use benefits alongside schemes such as Shared Ownership
- Support towards affordability
- Not all lenders will include income from benefits
- Some benefits won’t be accepted by some lenders
- 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. This is because it can be difficult to pass a lender’s affordability check.
Nonetheless, with a well-packaged application, you can show lenders that you’ve been in receipt of disability benefits, especially if you suffer from a long-term disability. This is because lenders can agree that your disability benefits are likely to 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, which is similar to the shared ownership scheme.
The scheme allows you to part-rent and part-buy your home, owning between 10%-75% of the property and paying rent on the remainder.
Can I get a mortgage on Jobseeker’s Allowance?
Yes, there are lenders that accept applicants receiving Jobseeker’s Allowance (JSA). If you’ve been claiming JSA for over a year, then mortgage approval can become 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 do 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 are in receipt of child benefits and want to maximise your borrowing power, you’ll need to make sure your lender is suitable. This means your lender should include 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’re claiming Universal Credit, it’s likely you’ll have a low income or be unemployed. Getting a mortgage under these circumstances can be very difficult, but it may still be possible.
To improve your chances, speak to a mortgage advisor who can assess your current situation in greater detail. We’ll then search for any potential lenders that are suitable, 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’re in receipt of 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 its own affordability system. Furthermore, other factors will affect the amount you’re able to borrow, such as your credit score and the deposit you have.
With that in mind, most lenders offer maximum amounts ranging between three and five times your annual income. It can get tricky because some lenders will only use a capped percentage of your benefit income. Other lenders won’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 between £75,000 and £125,000 as a maximum amount. That’s if they include your income from benefits in your assessment, as not all will.
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 you can 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 it’s advised to save as much as you can before applying.
Using a higher deposit can often unlock better rates too. Although it may take longer to save for a higher deposit, 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. This is because you’ll be given a budget that you can work towards. You’ll also have more confidence in viewing properties as you’ll know exactly how much a lender is likely to lend to you.
We’d still recommend you speak to an advisor before submitting an application for an AIP. This is because applying with unsuitable lenders could leave a footprint on your credit file, bringing your credit score down if you’re rejected.
Show evidence that you can repay a mortgage
If you fall short on an affordability assessment, your mortgage will be declined or you’ll be offered less. Spending time 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 make a note of 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 you may even need a specialist mortgage lender. Many high street lenders don’t accept bad credit in any form, even with 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 make sure 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 in addition to 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’re claiming 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 is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.