If you are in receipt of state benefits then getting a mortgage may feel unachievable but there are ways to make buying a home possible.
In this article we explain whether the state benefits you receive will count towards getting a mortgage and what evidence you will need. We also explain which lenders provide mortgages for people receiving benefits and how to enlist the help of a mortgage expert* to find a mortgage solution that will work for you.
Can I get a mortgage on state benefits?
Yes, it is possible to get a mortgage on benefits as long as you can meet the lender’s affordability requirements. You'll also need to have a good track record of managing your finances as well as a strong credit score. However, you will likely need to go through more checks and provide extra evidence to show that you can fulfil your mortgage commitment over the long term.
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Which types of state benefit payments will a mortgage lender consider?
This varies across mortgage lenders as each uses its own lending criteria and this could change according to your personal circumstances. Although it is not an exhaustive list, the following types of benefit payments can usually count towards your considered income when applying for a mortgage:
- Attendance allowance
- Carer's Allowance
- Child Benefit
- Disability Living Allowance
- Employment and Support Allowance (ESA)
- Pension Credit
- Personal Independence Payment (PIP)
- State Pension
- Universal Credit
If your circumstances mean that you are a person with protected characteristics under the Financial Conduct Authority's guidance on the fair treatment of vulnerable customers, lenders cannot treat you differently from other mortgage applicants. Protected characteristics can include disabilities, long-term illness, hearing or visual impairment as well as poor mental health and cognitive disabilities. You are also protected under the Equalities Act. So, for example, a person who has cancer or is disabled cannot be asked to pay a higher interest rate or higher deposit amount than is required for any other mortgage applicant.
How do mortgage lenders assess homebuyers on benefits?
Not all lenders will assess your application in the same way, so one of the key factors in achieving success is to source the best lender for your circumstances. Some lenders take a very supportive and inclusive approach to mortgage lending for those on low incomes as well as those in receipt of benefits.
Perhaps more importantly, lenders have different requirements when it comes to the amount of your benefit income that can be used as proof of income when assessing your mortgage application. While some lenders are happy to consider all of your benefit income when assessing your affordability for the mortgage, others may only consider a percentage of your income from benefits.
It is for this reason that we recommend you seek advice from a mortgage specialist* who will not only guide you through the application process but also use their knowledge to shortlist the best mortgage lenders for your specific situation.
How to prove your income from benefits for a mortgage application
Generally, a mortgage lender will require evidence to support a mortgage application that proves the amount and regularity of your income. If you are on benefits and earning a separate income then you will need to present evidence to support both, using the following documents:
- Payslips - you will need at least 3 months of payslips
- P60 - this will show your annual income
- SA302 - self-assessment tax return to show self-employed income
- Bank statements - this should provide evidence of benefit receipts and salary as well as regular outgoings
- Bill statements - 3 months of gas, electricity, council tax and other regular bills
How much can I borrow on a mortgage on benefits?
Mortgage affordability is assessed based on your income and outgoings as well as the deposit amount that you can put towards your property’s purchase price. Most lenders will limit the amount of money that you can borrow on a mortgage using income multiples, usually up to 4.5 times your income. If your income includes benefit income then you must check what proportion of your benefit income can be used before applying the income multiplier. You can read more about this in our article "How much can I borrow on my mortgage?".
Mortgage lenders usually offer higher income multiples to borrowers looking to secure a mortgage on a lower loan-to-value (LTV). This means that the greater your deposit amount as a percentage of your property purchase price, the better the terms of your mortgage will be. It is common for the highest income multiples to be offered to borrowers who can achieve an LTV of 75% or less.
How a mortgage on benefits works
| Amount | |
| Total earned income | £50,000 |
| Benefit income (amount that lender will consider) | £6,000 |
| Income considered by the lender | £56,000 |
| Mortgage amount based on 4 times income multiple | £224,000 |
| Deposit | £11,789 |
| Property purchase price | £235,789 |
In addition to your income, a mortgage lender will also assess your regular outgoings as this will indicate whether you can afford the monthly mortgage repayments. To boost your chances of getting a mortgage, you should consider paying down any debts that you have, not opening new lines of credit, ensuring all bills are paid for on time and cutting down on your regular spending as far as possible.
It is a good idea to check your credit file so that you can see all your lines of credit. You can then check to ensure these are well managed and take action where needed to remedy any negative credit factors.
What types of mortgage can I get on benefits?
If your benefit payments combined with any earned income can support your mortgage repayments on a long-term basis then you will qualify for most types of mortgage. You can choose between fixed rate mortgages and tracker mortgages on either an interest-only or repayment basis. You will find some of the best mortgage deals in the market updated regularly in our article, "Best mortgage rates in the UK".
How to buy a home if you are receiving state benefits
You may benefit from considering different types of home ownership schemes. There are a number of initiatives that can assist first-time buyers and people who are struggling to afford their next home. These include specific mortgage products as well as government schemes. Below, we describe some homeownership initiatives that may help you to purchase your home if you are on benefits or a low income.
- Shared ownership scheme - a way to buy a percentage of your house and pay rent on the remaining part while slowly buying more of your home over time. This scheme helps you to get your first steps on the property ladder amd enables you to build on the equity that you own over time.
- Mortgage guarantee scheme - this government scheme encourages lenders to make mortgages available to homebuyers with 5% deposits. It works by providing a guarantee against defaults ensuring there are more 95% LTV mortgage deals available in the market.
- No-deposit mortgages - although rare, there are some options for mortgage borrowers who have little to no deposit to use towards the purchase of a house.
- Home ownership for people with long-term disabilities (HOLD) - this initiative helps people with a long-term disability through a specific shared ownership scheme. It allows them to buy part of a property on the open market and staircase towards owning more of the property as time goes on. It is only available in England to households with a combined income of less than £80,000 per annum (£90,000) in London.
Which mortgage lenders accept benefits?
A number of mortgage lenders will accept applications from homebuyers whose income includes state benefit payments as long as they meet the qualifying criteria. These include Halifax, Nationwide and Coventry Building Society, but you will find that each mortgage lender may differ in the types of benefits they accept and how much of the benefit payment can be considered as income. A far more significant number of lenders will include state benefit payments in affordability calculations if it is not the only source of income - while some will allow the total amount of state benefits to be used, others will allow a proportion.
You can search for the best mortgage deals based on your property purchase criteria using our mortgage rate comparison tool which returns the best mortgage deals from over 90 lenders in the market.
How to get a mortgage on benefits
Arranging a mortgage can be time-consuming and often requires a fair amount of research to find the right mortgage solution. You should start by collecting all of your information and evidence to work out how much you can afford to borrow on a mortgage. This will help you to establish your buying power and how much you can spend on your house. It is worth bearing in mind that first-time buyers and people in receipt of disability benefits and other state benefits may qualify for homebuying schemes that make it easier to build towards owning your own home.
You will need information about lenders, mortgage products, homebuyer schemes and possibly new build schemes too. To help you navigate your way to home ownership it is often very helpful to speak with a mortgage broker*. Not only will the broker do a lot of the legwork in searching the market for the best mortgage deals for you, but they will also make you aware of routes to home ownership that you may not have known about or considered. Mortgage advisers have an in-depth understanding of mortgage lenders and the lending criteria that each will use for your application, so they can choose the best lender to fit your personal circumstances. Getting independent mortgage advice could save you a lot of time and ultimately prevent you from being declined for a mortgage, something you will want to avoid as it will need to be declared on subsequent mortgage applications.
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