Can I get a mortgage on benefits?

 

In the eyes of lenders many benefits are classed as income and can be used as such towards your mortgage affordability. But the type of benefit will play a part in whether the lender can use it, how much of they will use and for how long they can consider that benefit for. 

 

If you are receiving benefits, you will be aware that some benefits are ‘means tested’ which means they are awarded based on your income and what money you have in the bank. This means they are reviewed and subject to change depending on your level of earned income. These include benefits such as universal credit and working tax credits. They will change further if you are buying a property with another person as your benefit eligibility will be calculated as a couple, so your partners income and savings will impact your benefits. 

 

As a result, lenders will use a varying amount of universal credit and working tax credits for this reason. A lot of lenders won’t use it at all due to the fact it is reviewable and can be reduced or taken away at any time. 

 

The benefits that most lenders will use is disability allowance (as long as it is assigned to you) if the disability allowance is assigned to a family member such as child or parent it cannot be used for your mortgage as that money is intended to support the living standards of the person with the disability. 

 

PIP is paid to people with long term mental or physical conditions that prevent them from completing daily tasks. As these are long term conditions which typically won’t improve these are seen as long-term benefits that are guaranteed. As they are guaranteed lenders can rely on the payments and will use these towards mortgage affordability calculations. 

 

Depending on how many children you have the benefit you receive each month vary. At the time of writing child benefit is £96 per month for 1 child, £159 per month for 2 children and £170 for 3 children. Lenders will take into account typical costs for looking after children and will offset this with the amount of child benefit you receive. If one of you applying for a mortgage earns over £50,000 per year you do not qualify. Some lenders will accept this for the length of your mortgage, some will only accept it for a mortgage term that runs until your youngest child’s 18th birthday as this benefit stops then. 

 

Maintenance runs in the same sort of way that child benefit does with lenders, they will accept this as part of your mortgage affordability but will only use it to a point as by law they do not need to pay this every month once the child turns 18. 

 

Lenders will take this type of income on an ‘employed Basis’ as with most foster children you will be their sole carer and the child cannot be left with any other adult, so you are unable to work making this your full-time job. If the child in your care moves on to full time adoption, you can open up your home to another child and that source of income will continue. 

 

Very similar to PIP payments, the conditions that have led to the need for the industrial injury’s payments are permanent and life changing injuries that will rarely improve over time. As such lenders will take 100% of this income and use this towards your mortgage affordability for the term of your mortgage. 

 

Universal credit is another means tested monthly benefit that changes month to month depending on how much your earn, and is a benefit not every lender will accept due to the changing nature of it. If you are in receipt of universal credit because you live alone, this benefit may stop if you buy with a partner as your income is calculated as a pair. However if you have too much in savings (which you may because you're saving a house deposit) you will not qualify. The lenders that do accept UC will average out the last 3 months of income to establish how much they can use towards your mortgage affordability. 

 

All lenders are different so the amount of the benefit they use (some will use a % of the benefit) and the length of time the benefit can be used will vary from lender to lender. So as always, its best to check with an independent adviser like us to find the right lender and mortgage for you that maximises your benefit income to get you the best deal possible.