Mortgages and benefits

You can use a free online mortgage calculator to work out how much you can afford to:

• borrow in total
• pay monthly as mortgage repayments

Mortgage affordability calculator (MoneyHelper)

There is also a calculator to work out how much money you will need as a deposit.

Mortgage deposit calculator (MoneySavingExpert)

Buying a home: the steps involved (MoneySavingExpert)

Your credit score or credit rating is one of the things mortgage lenders use to decide whether to give you a mortgage. It shows how likely you will be to repay a loan or a debt.

It can be harder to get a mortgage if you have a poor credit score. Your credit score is part of your credit report.

How to check your credit report for free (MoneySavingExpert)

If you think your credit score is wrong, there are things you can do.

How to dispute errors on your credit report (MoneySuperMarket)

You can also try to boost your credit rating.

Tips to boost your credit rating (MoneySavingExpert) 

Before the lender gives you a mortgage, they want to know that you can afford your monthly repayments. This is also called a mortgage affordability test or check.

They will ask to see proof:

• of your income
• that you can keep up repayments

Your income can come from:

• benefits
• paid work

They will also ask about your outgoings (what you spend money on regularly).

It is harder to get a mortgage if benefits make up part or most of your income. But it may still be possible.

Some mortgage lenders view benefits as unstable income. This is because your situation could change, and you could lose those benefits.

Lenders have different rules about which benefits they accept as income. Some do not accept disability benefits.

If you receive benefits, it is usually easier to get a mortgage if you are working as well. Usually, they view earnings from paid work as more reliable income.

Getting a mortgage if you are ill or disabled (MoneyHelper)

There is no law to say you should be under a certain age to get a mortgage, as long as you can afford the repayments. Mortgage lenders may have their own rules about who they lend money to.

If you have saved over a certain amount, it can affect your benefits.

If you are under State Pension Age

Savings can affect your benefits if you claim:

• Universal Credit
• income-based Jobseeker’s Allowance (GOV.UK)
• Income-related Employment and Support Allowance
• Income Support (GOV.UK)
• Housing Benefit if you are under State Pension age

Your benefits will not be affected if you have under £6,000 in savings.

But if you have saved:

• between £6,000 and £16,000, you will lose some of your benefit payment
• more than £16,000, you will not be eligible for those benefits any more

Savings and benefits

If you are over State Pension Age

Savings still affect Housing Benefit if you are over State Pension age, but the rules are different.

You can have up to £10,000 in savings before it affects your claim. Every £500 over that amount counts as £1 of weekly income.

If you get Pension Credit guarantee credit, you can have more than £16,000 in savings without it affecting your Housing Benefit.

If you stop renting because you have bought a home, usually you can no longer claim:

• Housing Benefit or
• Universal Credit housing element

An exception to this is buying a home with shared ownership. You may be still able to get support with your rent.

This is a way to buy a home if you cannot afford to pay:

• the whole of a deposit and
• monthly mortgage payments

Shared ownership means you buy a share of the property and then pay rent to a landlord for the share they own. It is also called part-buy. It is a government-backed scheme.

Shared ownership scheme (GOV.UK)

You will have the option to buy a larger share of the property in the future.

You can apply for shared ownership if you receive benefits.

Shared ownership and disability benefits

The Home Ownership for People with Long-Term Disabilities (HOLD) scheme is available in England only.

You must be an adult and receive any of these disability benefits:

• Personal Independence Payment
• Attendance Allowance
• Disability Living Allowance care component at the middle or high rate

Your household income must be:

• £80,000 or less before tax if you live outside London
• £90,000 or less before tax if you live in London

There are other eligibility criteria.

As well as shared ownership, there are other ways to buy a property.

Right to Buy

If you rent your home from your local council, you may be able to buy it at a discount.

Right to Buy (GOV.UK)

The right to buy or acquire your home

First Homes scheme

You may be able to buy a home for 30% to 50% less than its market value. You must be:

• a first-time buyer
• able to get a mortgage for at least half the price of the property

First Homes scheme (GOV.UK)

Rent to Buy

You can rent a property at a lower rate to help you save for a deposit to buy a home. It is available in England only, apart from London.

Rent to Buy (GOV.UK) 

Help to Build

This is a loan to cover part of the cost of:

• building a home or
• paying someone to build a home for you

The loan is backed by the government.

Help to Build: Equity Loan (GOV.UK)

It is available in England only.

In Wales, there is Get Help to Build a Home (Self Build Wales)

Other help to buy a home schemes in Wales (gov.wales)

There are 2 main types of mortgage:

• fixed rate, where you pay the same rate of interest for a number of years
• variable rate, where your interest rate can go up or down depending on what is happening with the economy

Mortgages can be:

• interest-only, which means you only pay the interest every month or
• repayment, which means you pay off some interest as well as some of the loan every month

Mortgage types explained (Which)

Video: the different types of mortgages (Which)

It is a good idea to talk to an independent mortgage adviser or broker. They will help you search the market to find a mortgage that:

• you can afford
• suits your needs
• suits your circumstances

Find a local independent mortgage adviser from:

• Unbiased
• Personal Finance Society

Most mortgage advisers give advice for free but charge a fee if you choose to take a mortgage they have found for you.

Mortgage advice: should you use a mortgage adviser? (MoneyHelper)

You can speak to MoneyHelper for free advice about debt and money.

Contact MoneyHelper

They also have information on what to do if you are struggling with your mortgage payments.

Help with mortgage payments (MoneyHelper)

Help with debt

As well as your deposit and mortgage repayments, there are other costs when you buy a home. Some of these are:

• legal fees
• Stamp Duty Land Tax in England
• Land Transaction Tax in Wales
• buildings insurance

Mortgage fees and costs when buying or selling a home (MoneyHelper)

Some lenders say you must have life insurance to get a mortgage with them. There is no law to say that you need it.

Life insurance can help your loved ones pay off your mortgage if you die.

If you do not want to or cannot get life insurance, you can look for a mortgage deal or lender that does not ask for it. A mortgage adviser can help with this.

Get independent advice

Support for Mortgage Interest (SMI) is a loan to help you pay the interest on a mortgage. You may be eligible if you receive:

• Universal Credit
• Income Support
• income-based Jobseeker’s Allowance (JSA)
• income-related Employment and Support Allowance (ESA)
• Pension Credit

See if you are eligible for Support for Mortgage Interest (GOV.UK)

Moving home and your benefits

You repay the loan with interest if you:

• sell your home
• transfer ownership of your home

Repaying your loan (GOV.UK)

Speak to your lender about your options. They may offer to renew your mortgage on a standard variable rate. This usually means your mortgage repayments will be higher.

You can also consider remortgaging. This means finding a new deal. A mortgage adviser can find out if there is a cheaper mortgage for you.

Changing to a new lender may mean there are fees to pay.

How much will remortgaging cost? (MoneySavingExpert)

If you have stopped work or started claiming benefits since your original mortgage, talk to your lender about options for renewing. Or a mortgage adviser can help you find a different mortgage deal.

Get independent advice

Talk to your mortgage lender as soon as possible. They will help you work out how much you can afford to pay.

Mortgage Charter Support is a government scheme that most mortgage lenders have agreed to. You are eligible if:

• you are finding it hard to pay your mortgage repayments but
• have not missed a repayment yet

You can choose from 2 options. Both will lower your repayments:

1. You can switch to interest-only repayments for 6 months.
2. You can extend your mortgage term, for example from 15 to 20 years.

Both options will lower how much you pay each month. They will not affect your credit score. But they will increase the cost of your mortgage in the long term.

Mortgage Charter Support (MoneySavingExpert)

MoneySavingExpert also has a free online calculator. You can find out how the 2 options could affect your repayments.

Mortgage Charter Support Calculator

You could apply for a mortgage payment holiday. This means you could have a temporary break from your mortgage payments.

The eligibility criteria and length will depend on your lender. After the payment holiday, your mortgage payments will be higher. Contact your lender to apply or get more information.

A guide to mortgage payment holidays (MoneyHelper)

You could look for a charity grant or hardship fund. Your local council may offer grants. It will have its own rules about who is eligible.

Disability grants

Help and advice when you are in debt