Rachel Lacey
Richard Eagling
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When you apply for a mortgage, one of the lender’s priorities will be to check that you can afford repayments. It does this by checking and verifying your income.
However, while earnings from paid employment are important to lenders, they do also consider income from other sources, including benefits. By law, lenders cannot discriminate against borrowers on benefits, who may be disabled or suffering from long-term illness.
Nonetheless, while lenders will consider benefits in their income calculations, borrowers still need to demonstrate they can afford the loan they are applying for. Unfortunately, if benefits are your only source of income, or have the potential to end, getting a mortgage may be difficult.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
What benefits are accepted by mortgage lenders?
Most lenders are likely to accept the following benefits:
- Attendance allowance
- Carers allowance
- Child benefit
- Disability living allowance
- Incapacity benefit
- Industrial injuries benefit
- Maternity allowance
- Pension credit
- Severe disablement allowance
- Widow’s pension
- Universal credit
However, it is important to note that not all the benefits listed will be accepted by every lender.
Some, for example, will only accept these benefits if you are employed or retired. And as many of these benefits can be payable to those on low incomes, they may not boost your income enough to get you through lenders’ affordability assessments.
» MORE: Best mortgage lenders
Can I get a mortgage if I claim universal credit?
Universal credit is paid to people who are on low incomes, including people who are in work as well as those that are not.
You will have more chances of getting a mortgage on universal credit if you are in work, as you will have earnings to supplement your benefits, increasing your total income.
» MORE: Getting a mortgage on a low income
How to get a mortgage if you are ill or disabled
If you are disabled or suffer from long-term health problems, this should not prevent you from getting a mortgage. Anti-discrimination laws mean lenders cannot treat your application differently or impose different terms.
However, you will still need to prove you can afford the loan, so it’s important to get your paperwork in order to ensure you can demonstrate how much you have coming in each month, both from benefits and from earnings from work.
If affordability is an issue, it may also be worth exploring shared ownership schemes for the disabled. HOLD enables people with long-term disabilities to buy a partial share in a property, with a housing association purchasing the remainder. It is also worth contacting MySafeHome, which provides help and support to disabled people who wish to buy their own home.
Your local Disabled People’s Organisation (DPO) may also be a good source of information and support.
What about joint mortgages?
If you are looking to buy a home with a partner, friend or family member, it may be easier to get on the property ladder. This is because the lender will take their income into account as well, with most lenders offering a maximum of 4.5 times joint income.
» MORE: A guide to joint mortgages
What if I have bad credit?
If you are on a low income or on benefits, a good credit history should improve your chances of getting a mortgage.
If you have bad credit it will be harder, as fewer lenders will consider your application. However, that is not to say it is impossible, as much will depend on the severity of your credit problems and the amount of time that has passed since you experienced them.
How to find a lender
There’s nothing to stop you from applying directly to a lender, but you should try to get a mortgage in principle first. This will give you an idea of whether you may be offered a mortgage and for how much, usually without affecting your credit score.
Alternatively, it may make sense to get specialist advice from an independent mortgage broker. Although some charge fees, many offer free advice, taking a commission from lenders instead.
Different lenders will approach benefits differently. Some, for example, will have a cap on the level of benefit income they will accept in an income calculation, while others may not. Some will consider different benefits to others.
A good broker will assess your situation and should be able to recommend the lenders most likely to accept your application. You may even be able to find a broker that specialises in mortgage applications for those on benefits.
In addition to recommending the right lender and the right product, a broker should also help with your application.
» MORE: Compare current mortgage rates
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