How to secure a mortgage while receiving benefits
- Martin Green
- Aug 27
- 6 min read
If you receive benefits from the government, such as PIP, universal credit, or maintenance income, you may be wondering whether you’ll be
accepted for a mortgage.
The short answer is yes, it’s completely possible to be approved for a mortgage while on benefits. However, while lenders can’t discriminate against a borrower’s source of income, it may be more difficult for you to secure a mortgage if the benefits you receive are your main source of income.
Luckily, there are lenders out there who accept benefits as income on a mortgage application, but it can be difficult to find them without a mortgage advisor. Today, J&M GMS Ltd will walk you through the common questions surrounding mortgages and benefits and what to do to increase your chance of approval.
At J&M GMS Ltd., we offer unbiased mortgage advice to potential home buyers, no matter your financial situation or background.
Your legal rights as a mortgage borrower in the UK
First and foremost, it’s important to address your legal rights as a mortgage borrower.
Even if part (or all) of your income is from benefits, you still have clear protections in UK mortgage rules, and knowing these will help you push for fair treatment.
Lenders and brokers must act to deliver good outcomes for customers and support people in vulnerable circumstances under the FCA’s consumer duty.
Firms must assess affordability under the FCA Handbook (MCOB), basing decisions on a realistic appraisal of your income and outgoings, which includes benefits where a lender’s policy allows.
If you’re disabled, service providers, including lenders and brokers, must make reasonable adjustments (accessible formats, extra time on calls, a preferred contact method, or letting a trusted person help you) according to the Equality Act.
A lender can’t reject your application due to you being ill or disabled or make you pay a larger deposit or larger monthly repayments than non-disabled borrowers.
However, if your illness or disability isn’t covered by the Equality Act 2010, then mortgage advice is highly advised so you can find a loan that is right for you.
Why does benefit income make mortgage applications trickier?
So, why, exactly, does receiving benefits make it harder to be approved for a mortgage loan?
When applying for a mortgage, lenders want to be sure that your income is stable and reliable enough to pay it back in monthly instalments. For people receiving benefits, this can sometimes raise additional questions for lenders.
1. Perception of stability
While a salary is usually fixed, benefits can change depending on your circumstances, reassessments, or government policy.
While this doesn’t mean they aren’t a valid income, it does mean you may face more scrutiny, as benefits are more prone to unexpected changes.
2. Lender policy
Each bank or building society sets its own rules on which benefits it will accept.
While some are comfortable with certain benefits, such as Disability Living Allowance or PIP, others may be more cautious, meaning you need to meet a range of criteria that can be overwhelming to navigate on your own, to say the least.
3. Affordability calculations
To determine how much you can borrow, lenders usually consider your entire income and then apply a multiplier.
Some lenders may only use a percentage of your benefit income in their calculations if your income is part salary and part benefits, which would lower the amount of money you are offered for a loan.
4. Long-term picture
Lenders will look at your ability to repay your mortgage throughout the whole process.
For example, benefits linked to children may not last throughout a 25- or 30-year mortgage term, and this can affect how much weight a lender gives them in your application.
The good news is that being on benefits doesn’t necessarily close the door on homeownership. It simply means you just need to approach the process with care and, ideally, with expert guidance.
Which benefits do lenders accept?
When applying for a mortgage, the following benefits may count toward your overall income:
Disability Living Allowance (DLA)
Personal Independence Payment (PIP)
Attendance Allowance
Carer’s Allowance
Child Benefit
Child Tax Credit / Child Element of Universal Credit
Working Tax Credit
Universal Credit (some lenders, often partly)
Employment and Support Allowance (ESA)
Industrial Injury Benefit
Income Support
Maternity Allowance / Statutory Maternity Pay
Bereavement Support Payment / Widowed Parent’s Allowance
State Pension
Pension Credit
War Widow’s Pension / Armed Forces Compensation
Note: Not every lender will accept all of these, and some may only count a percentage (e.g., 50–100%) depending on the type of benefit and how long it’s expected to continue.
Please note that this is not an exhaustive list either.
How lenders calculate what you can borrow
In the UK, every lender has to follow the Financial Conduct Authority’s (FCA) affordability rules, which mean they look at:
Total household income: Salary, benefits, pensions, and other regular income.
Regular commitments: Credit card balances, personal loans, car finance, childcare, etc.
Day-to-day spending: Food, travel, utilities, insurance, subscriptions.
Future-proofing: They assess whether you could still afford repayments if interest rates were to rise slightly.
Due to this, two people with the same income may be offered different borrowing amounts depending on how much of their budget is already taken up by other commitments.
Some lenders will include 100% of a stable benefit, while others may only count a portion of variable benefits, such as Universal Credit or Child Benefit.
For example:
Suppose you earn £18,000 a year from employment and receive £6,000 a year in benefits. This would mean your total income is £24,000.
Lender A might count all of this and offer up to 4.5 × £24,000 = £108,000.
Lender B might only count 50% of the benefits, so £18,000 + £3,000 = £21,000, offering up to 4.5 × £21,000 = £94,500.
Lender C might decline if the benefit portion makes up too much of the overall income.
Special mortgage options and government schemes
People on benefits may assume that this means their options are limited, but that isn’t the case.
If you receive benefits, there are several schemes and alternative paths that can make home ownership more achievable, some designed for people with lower incomes and others for those living with a disability.
There are also general schemes that may be better suited to those whose income includes help from benefits.
Shared ownership
A shared ownership scheme allows you to buy a portion of a property (typically between 25% and 75%) and pay rent on the rest.
These schemes come with lower deposits and reduce monthly payment prices, as you’re only financing part of the home. Some lenders are open to shared ownership applicants who rely partly on benefit income, and you can even increase your share over time (a process called ‘staircasing’).
HOLD (Home Ownership for people with Long-term Disabilities)
HOLD is a specialist shared ownership scheme for individuals with a long-term disability, designed to enable borrowers to purchase a home that meets their specific needs.
The good thing with this is that you can buy a home even if it’s not directly offered by a housing association. It can be combined with certain benefits, such as Disability Living Allowance or Personal Independence Payment.
Mortgage guarantee scheme
Launched by the government, this scheme encourages lenders to offer mortgages with just a 5% deposit.
This scheme is open to first-time buyers and home movers and is available on homes up to £600,000. Lenders offer high loan-to-value (LTV) mortgages up to 91%-95%. To mitigate risk for lenders, the government provides a guarantee on the portion of the mortgage exceeding 80%.
Right to buy
If you’re renting a council or housing association property, you may be able to buy it at a discounted price through Right to Buy (England).
You usually need to have been a public sector tenant for at least three years to qualify, with discount levels up to £136,400 in London and £102,400 in the rest of England.
Support for Mortgage Interest (SMI)
If you already own a home and are receiving certain benefits (such as Universal Credit, Pension Credit, or Income Support), the government may help with mortgage interest through SMI.
This loan is repayable when you sell or transfer the property, and it doesn’t cover capital repayments, only interest. It’s a great option for those with a tight income and are looking for a safety net.
How J&M GMS Ltd. can help you get approved while on benefits
With access to over 80 lenders with options not available on the high street, our mortgage advisors can search far and wide to help you find a mortgage that suits your needs.
We know how daunting it can be to secure a mortgage when you’re on benefits and the challenges that come with it.
Instead of you applying blindly and risking unnecessary rejections, we’ll review every part of your income and match you with lenders more likely to accept your situation. We’ll also explain any schemes available to you and present your application in a way that will instil confidence in lenders.
Get in touch today to chat with one of our Liverpool mortgage advisors and become one step closer to securing your dream home.
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