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Can You Get A Mortgage On Benefits & Universal Credit?

In the UK, benefits have long played a crucial role in supporting individuals and families, giving them extra income and providing financial stability in times of need. However, trying to navigate the path toward homeownership when you are claiming benefits is not straightforward. 

While the landscape of mortgage lending is primarily set up in a way that caters to those in full-time employment, a common misconception is that being on benefits outright disqualifies you from securing a mortgage. This isn’t necessarily the case. The financial world is full of different lenders, Government-backed schemes and mortgage products which can help those on Universal Credit and other benefits get onto the property ladder.

The question of whether or not you can get a mortgage on benefits tends to hinge on how different lenders view various types of benefits and your broader financial health.

In this blog, we’re going to take a look at how being on benefits will affect your eligibility for a mortgage and hopefully help answer the question; can you get a mortgage if you are on benefits? With a good degree of accuracy and detail.

Which Benefits Count As Income When Applying For A Mortgage?

Understanding which benefits are considered as income is the first place to start in trying to work out whether or not you’re likely to be accepted for a mortgage whilst claiming benefits or not. 

Lenders often adopt a varied stance on the inclusion of benefits as part of an applicant’s income, with a generally more lenient approach towards certain types of benefits. For example, Disability Benefits tend to be viewed more favourably, in part due to their permanent nature and the stability they imply about the applicant’s income.

The specific benefits that lenders are going to scrutinise and count towards a person’s total income include Universal Credit, Child Benefit, Disability Living Allowance (DLA), Severe Disablement Allowance, Incapacity Benefit (IB), and Carers Allowance. Each of these benefits serves distinct purposes and comes with its own set of criteria for eligibility, which in turn affects how lenders view them.

  • Universal Credit is often part of the conversation due to its role as a comprehensive support mechanism, merging several benefits into one. Lenders considering Universal Credit will typically look at the overall financial health of the applicant, considering other income sources and financial commitments.
  • Child Benefit is sometimes considered, particularly if it significantly contributes to the household’s income and is demonstrably used towards the upkeep of the home and dependents.
  • Disability Living Allowance (DLA), Severe Disablement Allowance, and Incapacity Benefit (IB) are viewed under a similar lens due to their nature as support for individuals with disabilities. These benefits are often seen as stable income sources, given their long-term and sometimes lifelong tenure.
  • Carers Allowance is acknowledged by some lenders for individuals who provide care, recognising the essential support it offers to the caregiver’s financial stability.

image of a contract being handed over for a mortgageCan You Get A Mortgage With Just Benefits?

Getting accepted for a mortgage when your only income is benefit can be pretty challenging. It usually comes down to the fact that you’ll struggle to pass the rigorous affordability checks that lenders have without being in some form of employment.

These checks are designed to ensure that applicants have the financial capacity to meet their monthly mortgage repayments over the long term. The nature of benefits, in that they are often perceived as less stable or insufficient compared to employment income, makes it difficult for lenders to gauge the long-term financial reliability required for a mortgage commitment. 

Whilst there are a few mortgage lenders who might consider applications based solely on benefit income, such cases are exceptions rather than the norm. 

Getting A Mortgage With Benefits & Part-Time Employment

If you’re in steady employment and using benefits merely as a financial top-up each month, your chances of mortgage application being approved are much higher. Because you can demonstrate a more stable income there is a much larger selection of lenders that are willing to consider your application.

When you apply for a mortgage and have employment as well as benefits it can actually put you in quite a favourable position with lenders. This is as many lenders now recognise the value of including benefits as part of your overall income in their assessments. Essentially, your earnings from employment plus your benefits gives them a larger amount of total income for them to judge your ability to make repayments against.

image of a couple moving into a new home3 Top Mortgage Applications & Benefits FAQs

Can I Get A Mortgage On Universal Credit & Other Benefits?

Yes, it’s possible to secure a mortgage on Universal Credit and other benefits. Many lenders consider various benefits as part of your income, especially if they’re supplemented by part-time or full-time employment. The key is to demonstrate financial stability and the capacity to meet mortgage repayments.

How Much Can I Borrow If I Am On Benefits?

The amount you can borrow while on benefits will depend on several factors, including the lender’s criteria, your total income (including benefits), your credit history, and your outgoings. Lenders use these details to assess your affordability and determine how much they’re willing to lend.

What Type Of Mortgage Can I Get If I’m On Benefits?

Individuals on benefits can apply for the same types of mortgages as anyone else, including fixed-rate, tracker, and interest-only mortgages. Your eligibility for these mortgage types will depend on your overall financial situation and the lender’s assessment of your ability to maintain repayments.

Get Expert Help On Your Mortgage Application With Peritus Financial

As we’ve explored throughout this guide, being on benefits or Universal Credit can make getting a mortgage quite difficult. The key takeaway from our article though, is that being on Universal Credit or other benefits does not automatically disqualify you from homeownership. 

Many lenders are open to considering various benefits as part of your income, especially when your UC payments are made alongside some form of gainful employment.  

If you’re considering homeownership and are on benefits, don’t navigate this journey alone. Contact Peritus Financial today for expert advice tailored to your unique situation. Let us help you unlock the door to your new home, proving that with the right support, the path to homeownership is open to everyone, regardless of their financial circumstances.