Can you borrow for a home while on benefits?

There is no rule that stops you getting a mortgage because your income comes from benefits, and no rule that makes a lender accept it. What decides the outcome is the lender's own criteria and the affordability check every application goes through. The law says lenders must treat you fairly and take your circumstances into account¹, but that is a duty about how they treat you, not a duty to lend.

In practice, some lenders count regular benefit payments as income and others do not². Universal Credit, Child Benefit and disability benefits such as Personal Independence Payment are each treated differently, and the treatment varies by lender as well as by benefit. A larger deposit, a clean credit file and a second applicant with earnings all change the picture.

If you already own a home and fall behind, the Support for Mortgage Interest scheme can help with the interest on your mortgage, but it is a loan repaid when the home is sold, not a benefit¹. Housing Benefit cannot be used to pay a mortgage³.

How lenders treat benefit income on a mortgage application

Every mortgage application is assessed on affordability and credit status, and the lender's criteria decide the rest. All potential borrowing is subject to affordability checks and credit status, and what a lender will offer depends on your regular commitments, the type of pay, self-employment, the deposit, your age and whether the borrowing runs past your expected retirement date⁷.

The affordability check itself is not mysterious. Lenders usually start by asking about your household budget, then look at income, regular bills and spending needs, and check your credit file for details of debts⁴. Underwriting also covers checks on your credit history, making sure you can afford the property, and making sure you are eligible⁸.

Where benefit income sits in that assessment is a matter for the lender. Many lenders class regular benefit payments as a form of income, which is why loans aimed at people on benefits can be applied for while claiming². That is a statement about lenders in general, not a guarantee that any particular lender will count your benefits. Some will, some will not, and the ones that do may apply their own rules about which benefits qualify and how much of the payment they will use.

One practical point that catches people out: taking out a mortgage or loan while on certain benefits, or in a break between two periods on benefit separated by 26 weeks or less, can affect eligibility for help with housing costs later. You may not be eligible for any help in that situation⁹. That does not stop you borrowing, but it is worth knowing before you commit.

Which benefits lenders may count, and which they usually do not

There is no published list of benefits that all lenders accept, because each lender sets its own criteria. What the sources show is a pattern: benefits that arrive regularly and predictably are more likely to be counted, and benefits paid for a specific purpose, such as disability costs or housing costs, are more often excluded.

The distinction matters because a lender assessing your income is asking whether the money will keep arriving. Universal Credit is the main working-age means-tested benefit and replaced six legacy benefits and tax credits¹⁰, so for many claimants it is the household's core income. Whether a lender will use it is a commercial decision, not a legal one.

Some benefits are excluded from income calculations by design. Pension Credit does not count Adult Disability Payment, Attendance Allowance, Christmas Bonus, Child Benefit, Disability Living Allowance, Personal Independence Payment, social fund payments such as Winter Fuel Allowance, or Housing Benefit as income¹². That is a rule for Pension Credit, not for mortgages, but it shows how differently the same payment can be treated depending on what it is being assessed for.

Affordability checks, deposits and credit history

The affordability check is the same process whether your income comes from work or benefits. Lenders look at income, regular bills and spending needs, and check your credit file for debts⁴. Underwriting covers your credit history, whether you can afford the property, and whether you are eligible⁸. Borrowing is subject to affordability checks and credit status, and depends on regular commitments, pay type, self-employment, deposit, age and borrowing beyond retirement date⁷.

Deposit size is one of the levers within your control. No-deposit, 1% and 2% deposit mortgages are available to first-time buyers who meet the affordability checks⁵. A bigger deposit reduces the amount you need to borrow and the risk the lender takes, which can matter more when the income is benefit-based.

If you are already a homeowner and want to remortgage, the same checks apply. The Mortgage Charter allows customers who are up to date with their payments to take one-off options without a new affordability check or affecting their credit score¹⁹. But affordability will need to be checked if borrowers wish to permanently convert to an interest-only mortgage, or where the mortgage term is proposed to be extended beyond the borrower's expected retirement date¹⁹.

Other routes: joint applications, guarantors and shared ownership

If your own income will not support the borrowing, there are routes that bring in someone else's or reduce what you need to borrow.

A joint mortgage is the most common. Lenders will normally only take the income of the two highest-earning people into account when deciding how much to lend, so adding a third or fourth name does not automatically increase the amount²⁰. If you apply jointly, both applicants' incomes and commitments are assessed.

Guarantor and family-assisted mortgages are another route. There are a number of different ways to arrange a family mortgage, including a traditional guarantor, an enhanced contribution guarantor, a multi-family guarantor, a sibling guarantor, releasing equity from an existing property, and multi-party mortgages²¹. Each works differently, and the guarantor takes on real risk if the mortgage is not paid.

Shared ownership reduces the amount you need to borrow because you buy a share of the home and pay rent on the rest. Any mortgage in shared ownership cases will be subject to Support for Mortgage Interest rules²². If you are a shared ownership claimant, you may be eligible to receive help to cover the rent part and a Support for Mortgage Interest loan to help with the mortgage interest²³. For joint claimants, both members of the claim are required to sign both the Loan Agreement and Charge Form²⁴.

If you are a council or housing association tenant, buying your current home may be an option. Right to Buy and Right to Acquire schemes exist for eligible tenants²⁵, and if you have a Help to Buy ISA or Lifetime ISA you can use it to pay a deposit for a home through Right to Shared Ownership or Rent to Buy²⁵. The First Homes Fund also allows a Help to Buy ISA or Lifetime ISA towards your deposit²⁶.

If you fall behind: help with mortgage payments and repossession

If you are a homeowner and getting certain benefits, you could get help towards interest payments on your mortgage through Support for Mortgage Interest²⁷. It is a loan, not a benefit, paid by the Department for Work and Pensions to help with some of the interest payments on your mortgage for people receiving certain benefits²⁸. You must receive one of a listed set of benefits and be liable to pay interest on your mortgage or have an eligible home improvement loan²⁹.

The scheme has limits. You can only get help with interest payments on a mortgage for the home you normally live in, or a loan for essential repairs, improvements or disability adaptations³⁰. If you are claiming Universal Credit, you will only get help with mortgage payments if you have been claiming for three months or more, with no breaks or earned income³¹. The qualifying benefits include Pension Credit, Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance and Universal Credit³².

If you fall behind, the lender may arrange a forbearance agreement with you, which allows you to repay any missed payments³³. If you have a mortgage or secured loan on your home and you fall behind on payments, the lender could take court action to repossess your home, which could be sold to repay what you owe³⁴. Bankruptcy carries its own risk: the trustee tells your mortgage lender you are bankrupt, and they may consider repossession even if you are up to date with your payments, and it is more likely if you are behind³⁵.

Legal aid can help with stopping or delaying eviction from a tenancy, repossession because of mortgage arrears, illegal eviction and landlord harassment, challenging a council decision on a homeless application, and sometimes serious repair problems for renters³⁶. Free and impartial help is available from MoneyHelper and from debt advice charities such as StepChange.