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Mortgage on benefits: The lenders that accept benefits
It is still possible for you to get a mortgage if you're on benefits. Many lenders will take government benefits into account when calculating your affordability.
Our guide outlines the key things to consider if you’re trying to get a mortgage while receiving government benefits, including which benefits are usually accepted as income, what different lenders’ policies say and what home ownership schemes are currently available.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Can I get a mortgage on benefits?
Yes, you can get a mortgage when receiving benefits. When assessing your mortgage application, a lender’s biggest concern is the amount and stability of your income – and many are happy to consider government benefits as a source of income.
Therefore, as long as you can afford a mortgage, there is no reason why being on benefits should stop you applying for one.
The biggest hurdle for many mortgage applicants is that their benefits are often used to supplement a low income. If you’re in that position, check out our guide on getting a mortgage with a low income.
Which income sources qualify for a mortgage?
As well as income from an employer or your own business, many lenders will take government benefits into account when calculating your affordability.
These include the following:
- Attendance Allowance
- Bereavement Support Payment (BSP)
- Carer’s Allowance
- Child Benefit
- Child Tax Credit
- Employment and Support Allowance (ESA)
- Industrial Injuries Disablement Benefit (IIDB)
- Maternity Allowance
- Personal Independence Payment (PIP)
- Pension Credit
- Universal Credit
- Working Tax Credit
Some mortgage lenders will only consider these benefits as income if you’re also employed or retired. A few won’t consider them at all.
The easiest way to find a lender who will take your benefits into account is to work with a mortgage adviser. These professionals have detailed knowledge of lenders’ individual eligibility criteria and will be able to point you towards the best lender that’s willing to work with you.
Mortgage options if you’re disabled or ill
Your physical health won’t play a role in a lender’s decision on your mortgage application. In fact, it’s illegal for it to alter its offer based on your health.
However, a lender will place a lot of weight on your income, and this is why a lot of ill or disabled mortgage applicants struggle to secure a deal.
If your health is too poor for you to work, it could be difficult to earn enough to be approved for a mortgage, but it’s not impossible.
Can disability benefits count towards a mortgage?
Mortgage lenders will make a calculation on the maximum amount you can borrow based on your annual income.
However, not all mortgage lenders will consider disability benefits when assessing your income. Some will flat-out refuse to accept these payments as income, while others will only consider these benefits if you’re also employed or retired.
If disability benefits make up the majority of your income, it’s worth only approaching lenders who will consider these payments.
The easiest way to find these lenders is by using a mortgage adviser. These individuals have specialist knowledge about the inner workings of lenders’ eligibility assessments and will be able to recommend to you the deals that you’re most likely to be approved for.
Home ownership schemes for disabled people
If you receive disability benefits, there are a couple of home ownership schemes available for you as part of the government’s affordable housing scheme.
- HOLD – (Home ownership for people with a long-term difficulty). This scheme works similarly to shared ownership, but a local housing association will buy the remaining share of the property. It’s the housing association that negotiates with the seller and mortgage lender on your behalf. You can only apply for this scheme if traditional shared ownership properties do not suit your needs.
- My Safe Home. A similar shared ownership scheme for disabled people, albeit with stricter eligibility criteria and added fees. This is only suitable for people who are too disabled to work.
There is nothing stopping disabled people from applying for a mortgage through normal means, provided they can afford it. In fact, it’s illegal for lenders to discriminate against applicants based purely on their disability.
Mortgage lenders’ policies on applicants with disabilities
Below, you’ll find information from July 2021 about how some major UK banks and building societies can help out mortgage applicants with disabilities.
| Provider | How it can help | Compare |
|---|---|---|
| Aldermore Bank |
| Compare with broker |
| Barclays |
| Compare with broker |
| Coventry Building Society |
| Compare with broker |
| Halifax |
| Compare with broker |
| HSBC |
| Compare with broker |
| Nationwide Building Society |
| Compare with broker |
| Natwest |
| Compare with broker |
| Royal Bank of Scotland |
| Compare with broker |
| Santander |
| Compare with broker |
| Virgin Money |
| Compare with broker |
| Yorkshire Bank |
| Compare with broker |
Home ownership schemes for people with low incomes
The government has created a range of schemes to help people with low incomes be able to step onto the property ladder. Taking advantage of these will make it easier to have a mortgage application approved.
- Help To Buy equity loans. This scheme allows you to borrow up to 20% of a property’s value from the government to put towards your mortgage deposit. You’ll only need to stump up 5% of the property’s value yourself, potentially allowing you to secure a 75% mortgage with very little down payment. The equity loan is interest-free for 5 years, and you’ll only need to pay it back once you’ve sold the house or completed your mortgage term.
- Right To Buy. If you live in a council or housing association property, you may be able to buy it at a huge discount using Right To Buy. You’ll need to have lived in the property for at least 3 years to be eligible, but you’ll get a bigger discount the longer you’ve lived there. You can apply to buy the property from your landlord via the Right To Buy website.
- Starter homes. The government has worked with house-building companies to construct hundreds of thousands of Starter Homes, available at 80% of their market value. You can register your interest in this scheme via the government’s Starter Homes website.
How to get a mortgage on benefits: A summary checklist
1. Work out your income, including any benefits you receive.
2. Research the benefits-related lending policies of different mortgage lenders before you apply.
3. Consider using a mortgage broker if you want to save some research time or explore the wider market.
4. If you can’t get a mortgage to buy a house outright, consider any shared ownership schemes that may be open to you.
5. You could also look at buying a house jointly with someone else to boost your borrowing capabilities (although remember your finances will be linked to theirs if you buy a property together).
How to boost your chance of mortgage approval
- Borrow less. The lower the amount you apply to borrow from a mortgage lender, the more likely you are to be approved for the loan. A smaller mortgage means lower repayments that you’re more likely to be deemed able to afford. You can borrow less by saving a bigger deposit, looking to move into a cheaper house or taking advantage of the schemes listed above.
- Reduce your outgoings. Lenders will check your recent bank statements to make sure you’re able to afford your mortgage repayments. By reducing your regular outgoings now, you’ll come across as a more viable prospect. Start by haggling over the cost of your utility bills and paying off any debt you’re paying interest on.
- Apply jointly. You can apply for a mortgage jointly with up to 3 other people. All of your incomes will be considered jointly during affordability assessments, so this should dramatically increase the size of the mortgage deemed affordable to you. Bear in mind that you’ll be jointly responsible for clearing mortgage debt, even if only one of you has stopped making repayments. What’s more, all homeowners will have to agree on when the property is going to be sold.
The bottom line
It is possible to get a mortgage when you’re in receipt of benefits, although the total amount you can borrow will depend on your overall income, including those benefits and any salary you may have coming in. You can widen your options by looking at any relevant home ownership schemes or by buying jointly with someone else. Different lenders will have different applicant criteria and different benefits documentation they will accept, so it could be beneficial to use a mortgage broker who will have a broader knowledge of lending criteria and access to many mortgage products on the market.
If you are on certain types of benefit, you may also qualify for a Support for Mortgage Interest (SMI) loan from the Department of Work and Pensions (DWP). This helps pay towards the interest on your mortgage, and you can apply if you own your home or if you’re in a shared ownership scheme. Citizens Advice says: “The DWP will charge interest on the SMI loan – this means you’ll pay back more than you borrowed. Even though you’ll pay interest, it could be cheaper than other ways of borrowing money. You’ll need to pay back the loan, but usually only when you sell your home or give it to someone else.”
From February 2020 to May 2020, mortgage approval rates fell by 87%.
For more property-related statistics, download the PDF below.
Download the 2021 Property statistics PDF
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Coventry Building Societ — “The lender’s website lists disability benefits as one of its “Unacceptable Sources of Income”
Should this say “Acceptable”? Else why would it be on the list.
Hi Steve,
Thank you for reaching out to Finder.
I have forwarded this to our publishing team for review and to see if any changes need to be made.
However, one of the essential criteria for eligibility is that you must have been employed for the last 12 months or self-employed for the last 24 months. It is also stated on their official page on Residential Criteria. Moreover, it is best to confirm this by contacting their support team at 0800 121 8899 or accessing their chat support located at the bottom right corner or the right middle side of their pages. Hope this helps.
Cheers,
Anne
My mother is selling her house to buy a bigger house, which I will move into once I have sold mine. My question is she is retired and on benefits. Which is the best mortgage company for a lifeline mortgage I think it’s called. Also if she dies can I take over the mortgage as I will be living there with my kids.
Hi Shez,
Thank you for reaching out to Finder.
While we do not provide specific product recommendations, we can help guide you through the process of comparing options. The page we are on provides you with access to a fee free expert mortgage adviser who you can reach at 08009530308 or you may also complete the form to access a list of online mortgage brokers who can further assist you on getting a lifeline mortgage set up. As well, depending on how the property is setup upon death of the owner, there are clauses that needs to be agreed on for the hours to be handed over to you upon death. You may inquire about this further with the mortgage broker. Hope this helps!
Cheers,
Reggie
I already own my home with 130,000k equity. We need to downsize but can’t afford anything in our area. We would need at least an extra 30k mortgage. I am
medically unable to work now and my husband is my carer. Could we get a small mortgage on our benefits? We are both 54 yrs old.
Hi Tracyjane,
Thanks for getting in touch with Finder. I’m sorry to hear about the problem you are having.
Generally, there are lenders who consider your Carer’s Allowance as a source of income. Since you own your home already, you can also use that as a collateral or security to increase your chance of getting approved.
As of this time, we don’t have a list of lenders who might be able to help you. However, you can always speak to a home loan adviser to explore your options. You can get in touch with one of them by calling 08009530308.
Once you found a loan, please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision. Moreover, check the eligibility requirements as well and consider whether the product is right for you.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua