Getting a Mortgage While on Benefits

Many people think that getting a mortgage while on benefits is impossible. This is not entirely true. It all depends on what kind of benefits you’re receiving and your own personal financial circumstances.

In this article, we will show you what is, and is not possible when on benefits, and give you some useful information and tips on how to apply for a mortgage for a home of your own.

Can you get a mortgage on benefits?

The short answer is yes. If you meet certain criteria, then you’re certainly in with a chance of securing a mortgage.

The money received for someone on benefits is usually not very high, so you may need another source of income, such as child maintenance.

It is also important that you get the right advice before you put in your application.

An expert mortgage advisor will help you find the right mortgage provider because, while some lenders may accept a set percentage of your benefits as income, there are those that won’t take benefits into consideration as income towards a mortgage application.

How to get a mortgage while on benefits

First of all, know that it is possible to get a mortgage if you’re on benefits. You should start by doing your research to find out whether you’re eligible for a mortgage.

Next, follow these simple steps…

1. Speak to a mortgage broker

Because mortgage lenders who are willing to accept an application from someone on benefits are few and far between, finding a mortgage advisor or broker who specialises in this area is essential.

We offer a free broker-matching service that can pair you up with the right advisor based on your needs and circumstances.

2. Spring clean your credit rating

Don’t take out any new loans in the run up to applying for a mortgage.

Make sure you pay utility bills, credit and loan repayments on time. This will help convince lenders that you are financially responsible and a good loan risk.

Credit reference agencies, such as Experian, can help you flag up any potential problems with your credit rating for free, before your lenders do their own credit search.

If there are any black marks, ask your broker whether it’s worth waiting a couple of months while you fix any problems and rebuild your credit rating.

3. Get all your paperwork ready

To make sure your application goes as smoothly and quickly as possible, make sure you get your bank statements and payslips together, including proof of the benefits you’re receiving.

All lenders are different, so find out how far back the lender will need these records to go. Some only ask for three months, while others ask for longer periods.

Your broker will walk you through each of these steps, offering you bespoke advice along the way and negotiating with the lender whose criteria you’re the best fit for to make sure you can declare all of your benefits and get the best deal.

What benefits do mortgage lenders accept as income?

There are many types of government benefits that some mortgage providers might consider when assessing whether or not you meet their affordability criteria.

These include –

It should be noted that for most people, housing benefits and child tax credits have been replaced with Universal Credit.

There are a few mortgage providers who will consider Universal Credit as an acceptable income source for a mortgage.

Usually, you will need another source of income to boost your average earnings to the required amount, as well as a suitable deposit, the higher the better.

Again, speak with a mortgage advisor or broker who specialises in mortgages for those low income or benefits.

Disability benefits

As long as you meet the affordability criteria, there are mortgages available for people on disability benefits.

One of the criteria is being able to prove that you have a long-term disability, and that the disability payments will continue for an extended period of time.

One option open to you if you suffer from a long-term disability, is that you may be eligible for a Shared Ownership scheme, which is part of the government’s affordable housing programme called HOLD (Home Ownership for people with Long-term Disabilities).

This is one option you could discuss with your broker.

Child benefits

There are some lenders who, depending on their criteria, may accept child benefit as part of your income when they come to assess affordability for your mortgage.

You will more than likely have to meet other criteria, as well as prove that you have enough income to prove to the mortgage provider that you can meet the monthly repayments.

How being on benefits affects a mortgage application

One of the main ways that benefits can affect mortgage applications is by impacting the affordability assessment; in other words, being on them might make your mortgage lender think you can’t afford the loan size and the repayments you want to take on.

Generally, mortgage providers are willing to loan up to 4.5 times your annual income.

Which means if you earn £18,000 a year from your job, and get an extra £3,000 in benefits, then the most they will offer is £94,500, which considering the cost of housing at the time of writing (September 2021), could severely limit your choices.

Another reason is bad credit. Depending on how bad your credit history is, it is still possible, but when you add being on benefits into the mix, then the number of lenders willing to look at your application will be even smaller.

What about remortgaging?

Remortgaging on benefits is possible, as long as you meet the lender’s affordability criteria for the deal you want.

If you started claiming benefits after taking out your original mortgage, however, there’s no guarantee your current mortgage lender would be willing to factor them into the affordability assessment.

To get the best remortgage deal, you will need to find the lender who’s best positioned to accept the highest percentage of your benefits as declarable income.

Which mortgage providers accept applications from people on benefits?

There are a few mortgage lenders who will consider an application from someone on benefits, and as all lenders are different, they will have different criteria and views on the different kinds of benefits.

Lenders who accept benefits at the time of writing include…

An income supplemented by long-term disability benefits are usually more acceptable than others, it all depends on the mortgage provider.

Mortgage lenders are constantly changing their eligibility requirements, so it pays to have a specialist broker shop around for the best mortgage provider to suit your needs and the best rates.

Get matched with an expert mortgage advisor

As you can see, getting a mortgage on benefits, while sometimes difficult, is not impossible if you get the right advice.

Depending on the type of benefits you are entitled to and if you have an additional income, you need to talk to an advisor or mortgage broker who is an expert in that area, someone who will provide the right advice that suits your own individual financial circumstances.

We offer a free-broker matching service that will take your needs and circumstances into account to pair you up with a mortgage advisor who helps people with benefit income get onto the property ladder every day.

Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and them today.