Can you get a mortgage on benefits?

Can I get a mortgage on universal credit?  

Whether you can get a mortgage on universal credit depends on your affordability. When you apply for a mortgage the lender assesses your income and outgoings to see if you’re in a position to meet the monthly repayments. If you have a low income, you might not pass the mortgage provider’s affordability assessment - regardless of whether you receive universal credit or not.

Mortgage providers have different criteria when it comes to universal credit – some accept various forms of universal credit as your primary sources of income where others don't. 

Receiving universal credit in itself doesn’t necessarily stop you from getting a mortgage. But if you don’t have enough money coming in, then this could cause your application to be denied.

Remember, every time you apply for credit, a footprint is left on your credit history for lenders to see. Making multiple applications in a short space of time can negatively affect your credit score – even if you’re accepted. So, it’s best to use an eligibility checker to see if you’re likely to be accepted, before you apply.

What income can be used to qualify for a mortgage? 

Various sources of income can be used to qualify for a mortgage, such as:

• Attendance allowance
• Carer’s allowance
• Child benefit
• Child tax credit
• Disability living allowance (DLA)
• Incapacity benefit (IB)
• Income from your employer
• Income from self-employed earnings, such as a business you own or freelance work
• Industrial injuries benefit (IIB)
• Maternity or paternity allowance
• Pension credit
• Severe disablement allowance
• Widow’s pension
• Working tax credit

How to get a mortgage on benefits  

There are four steps you should take when working out whether you can afford a mortgage, and how to get approved when on benefits:

1. Create a budget 

Create a budget so you keep track of your spending and find areas where you can make cutbacks. Make sure you include your:

• income
• current rent or mortgage payments
• household bills and council tax
• repayments on any debts
• food and fuel costs
• miscellaneous costs, like entertainment and hairdressers
• other regular bills, such as a mobile phone contract

2.  Consider your affordability 

Mortgage lenders base their decision partly on an affordability check. This is the ratio of your income to your outgoings and how much you can afford to spend on a mortgage each month. Now you’ve created a budget you’ll have a rough idea of how much money you have available for mortgage repayments.

You should also consider your affordability in the future – what if something happens and you have a lower income? What if interest rates go up? There needs to be some room in your monthly budget to account for potential changes in circumstance.

Affordability checks can be done without applying for a mortgage by using an online mortgage calculator. They estimate roughly how much you’re likely to be offered as a mortgage, based on your income and outgoings.

3. Sort out your paperwork 

You’ll need to gather together all your paperwork on your income and outgoings. This is because the provider will ask for proof of:

• what type of benefits you’re on, how much you receive and for how long
• any other income, such as a salary, or self-employed earnings
• your fixed monthly outgoings, like rent or mortgage payments, bills and debt repayments
• how much your variable outgoings amount to, including food, shopping and entertainment

4. Do your research 

If you receive benefits, it’s likely that there’ll be less mortgage options out there compared to if you had a fixed salary coming in. It’s important to thoroughly research different mortgage providers in order to find the best option for you. You can do this using:

• comparison websites
• mortgage brokers (like Ocean), who search their portfolio of lenders, or the open market, for a mortgage option that suits you
• researching providers directly online or by going in branch

It’s a good idea to use all of these methods when looking for a mortgage because not all deals and providers are available on all platforms. If you’re unsure where to start, speak to an independent mortgage adviser. They’ll be able to give you advice based on your personal circumstances.

How much annual income do you need for a mortgage?  

There isn’t an exact amount you need to earn as an annual income to get a mortgage. However, lenders do factor in your salary when deciding what size of mortgage to offer you and whether to offer you one at all.

Mortgage income multiples is a method used by most mortgage providers. They multiply your annual income by around 4.5 to work out the maximum amount they can offer you.

For example, if you earn £20,000 per year, the maximum mortgage you could potentially get would be £90,000. If you have a partner who earns the same amount, you could double this to £180,000, if you're making a joint application.

Just remember that your income isn’t the only factor mortgage providers take into consideration – your credit history and outgoings also play a part in their decision. So this example is just a rough guide.

Are there mortgage lenders that accept disability benefits? 

Yes, some mortgage lenders accept disability benefits as income – but you might find it tricky to find one.

If you’re looking to buy a house and you receive disability benefits, it might be worth speaking to a specialist mortgage adviser to find a suitable option.

Bear in mind, anti-discrimination laws stop mortgage providers rejecting your application simply because you’re disabled. Also, they can’t make you pay higher monthly repayments or a larger deposit than non-disabled customers.

It’s worth knowing that anti-discrimination rules apply to you even if you don’t consider yourself to be a disabled person. You could be covered under these rules of you:

• have a mental condition like depression or anxiety
• have a physical illness such as cancer, MS or HIV

Shared ownership schemes for disabled people 

You might want to consider one of these shared ownership schemes specifically designed to help disabled people:

1. HOLD – Home ownership for people with long-term disabilities 

HOLD is a scheme that allows people with long-term disabilities to buy a 25% to 75% share in a property and pay rent on the rest. Bear in mind that you can only apply for this if other shared ownership programmes don’t meet your needs.

2. My Safe Home 

My Safe Home have a shared ownership scheme and work with housing associations and local councils to help both disabled people and their carers buy their own homes.

Help towards paying a mortgage for disabled people 

If you’re disabled and need help towards paying for your home, you may be eligible for Support for Mortgage Interest (SMI). This is a government loan that you can use towards your mortgage – or towards loans you’ve taken out for repair work on your home.

Bear in mind, there are eligibility criteria you need to meet and since it’s a loan you’ll need to pay interest on top of the balance.