Getting a mortgage on benefits

Looking for a mortgage, but worried receiving benefits is standing in your way?

We are here to help.

If you receive benefits such as Universal Credit, maintenance income, or PIP, you may be wondering how this affects your chances of getting approved for a mortgage. The good news is that some UK lenders do accept benefits as income on a mortgage application. However, finding these lenders and navigating the process can be challenging, particularly if you also have bad credit.

So, should you buy a house or continue renting if you receive benefits?

In general, mortgage payments tend to be lower than rental payments, making it a viable option for reducing expenses and building equity for future security. While the upfront costs of getting a mortgage may seem daunting, in the long run, owning a home can be more cost-effective. Property prices also have the potential to increase over time, providing additional equity or wealth if you decide to sell. Additionally, paying a mortgage to build equity rather than paying rent can also be a way to leave an inheritance for loved ones. Landlords may also gradually increase rent, whereas a fixed-rate mortgage offers consistent and predictable payments.

The good news is, it is possible to get a mortgage in the UK while receiving benefits. The key factor in getting approved is your overall ability to repay the mortgage. If you have other sources of income, such as a job or pension, or assets like another property, you may be able to find a lender who will consider your application. Some lenders even accept income from benefits without requiring additional income from employment, as their main concern is your ability to make timely and full mortgage repayments.

Which benefits are accepted in mortgage applications?

The following benefits are typically accepted as income by many UK lenders, but it is best to consult a mortgage broker to find lenders who accept 100% benefit income or part income from benefits before making a formal application:

  • 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
  • Universal Credit

How can I get mortgage on benefits?

To get a mortgage while on benefits, you will need to find a lender with criteria that considers income from benefits. Working with a mortgage broker who has access to a variety of lenders can save you time and help you find the best options for your situation.

They can also inform you about affordable housing schemes and mortgage incentives that could make your mortgage and home purchase more affordable. It is important to carefully consider factors such as interest rates, early repayment fees, and the overall terms and conditions of the mortgage before deciding.

Can I get a joint mortgage while on benefits?

If you are applying for a joint mortgage with a partner, both of your incomes will be taken into consideration. The amount you can borrow will depend on your combined annual income, typically multiplied by 4.49 or more, depending on the lender and your circumstances. Other factors such as existing debt, financial commitments, and credit scores will also be considered when determining the amount you can borrow, and the terms of the mortgage.

Is it possible to get a mortgage while on benefits and with bad credit?

While having bad credit may limit your options and potentially result in higher interest rates, it is not impossible to get a mortgage while on benefits. Each lender has their own criteria, so it is important to carefully review their policies and avoid making multiple applications, as this could negatively impact your credit score. Seeking advice from a mortgage broker with experience in securing mortgages for individuals with bad credit and benefits can help you understand your options and improve your chances of getting approved.

In summary, while it may seem daunting to get a mortgage while on benefits, it is possible with the right approach. Working with a reputable mortgage broker can save you time and help you find lenders who consider income from benefits. Carefully considering factors such as interest rates, early repayment fees, and credit scores can help you find the most suitable mortgage option for your situation.

Can lenders refuse to offer me a mortgage because I’m on benefits?

By law, mortgage lenders cannot discriminate against you based solely on the fact that you receive benefits. They are more concerned with your overall ability to afford the mortgage repayments consistently throughout the loan term. The main factor for mortgage approval is demonstrating you can comfortably afford the monthly repayments considering your benefit income, any other income sources (e.g., part-time job, pension), and essential living expenses.

How to increase my chances of getting a mortgage while on benefits?

There are ways of increasing your chances to secure on mortgage if you are receiving benefits. Having another income such as part time job or pension and putting a bigger deposit of 20% or more will increase your chances of securing a mortgage.

Because we play by the book we want to tell you that…

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 upon your circumstances.
The fee is up to 1% but a typical fee is £595.

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