Mortgages for disabled people

If your income consists solely of benefits, it will be very difficult to secure a mortgage. You have to pass strict Mortgage Affordability Tests when you apply. Your lender will also assess how vulnerable you are to income shocks such as a rise in interest rates. There was further tightening up of these tests this year. This is going to make home ownership even further out of reach.

Sickness and disability benefits aren't as stable and secure as they once were. There are periodic re-assessments and future entitlement isn’t guaranteed. There have been many changes to the welfare benefits system and a freeze in the rate in which they increase. Simply put, they don't provide enough income to sustain a mortgage. Universal Credit, which is due to cover all areas by the end of 2018, will affect affordability and adds to the risk assessed by lenders.

There isn’t the same help in paying for a mortgage as when you rent. Limited help from Support for Mortgage Interest (SMI) is difficult to get with a new mortgage. There are also long waiting times before you qualify. This support is also changing in April 2018 from a benefit to a loan. If you receive SMI, you will get advice about your options by February 2018. Loan for Mortgage Interest rates of interest are based on gilt rates. You have to repay the loan, when you are able to return to work or when you sell the property. If there's no equity left in the property when it's sold and all other charges are repaid, the debt will be written off.

Home Ownership for People with Long-term Disabilities (HOLD)

HOLD is not a separate product but is a route into shared ownership. It’s available in England only. You can only apply for the HOLD scheme if other shared ownership schemes don’t suit your needs. You can apply for affordable home ownership through your local Help to Buy agent (LHBA). You must meet the agency’s general eligibility criteria.
  • You will need to be a first-time buyer (or be defined as being in housing need)
  • Your household income is £80,000 a year or less outside of London or £90,000 a year or less in London.
Our research has shown that it’s very difficult to get HOLD. There are few lenders offering mortgages for this scheme. My Safe Home has a specialist shared ownership product but it has complex eligibility criteria. It’s not suitable for disabled people in employment. There are charges involved with this product that add to the costs.

Mortgage FAQs

I’m disabled but I work. Can I get a mortgage?

A lot depends on how much you want to borrow and how long you want to borrow for. You must pass strict Mortgage Affordability Tests when you apply and in the future. Various stress tests apply to see how vulnerable you would be to income shocks or a rise in interest rates.

The best way to find out if there is suitable mortgage product for you is to talk to a mortgage broker. The broker will search the market for you to find a product which is suitable for your circumstances. You can find local independent financial advice from Unbiased.

Check your credit report before applying for mortgages. Make sure there are no issues with your credit file. It was also give you an idea of your credit score. There are some organisations offering free credit reports such as Noddle.

Usually the higher the lending risk, the more expensive the mortgage. The interest rate could be higher and the arrangement fees could also be higher too. You should always get independent financial advice before taking on a mortgage.

What if I am the parent of a disabled child and have enough income from children's benefits?

Lenders will generally not consider any income from benefits you receive as a carer for children. This can also include Child Tax Credits and Working Tax Credit.

I live in a council property and I will receive a large discount if I exercise my right to buy. I won't need a large mortgage. Would I qualify then?

The lender will still assess affordability. It’s unlikely that even borrowing less would mean that you could access a mortgage if your income is solely made up of benefits.

I have an indefinite/lifetime award of DLA so my income isn't going to change. Why won't the lender take this into consideration?

Disability Living Allowance (DLA) is ending for people aged between 16 and 64. All existing DLA claimants may need to claim Personal Independence Payment (PIP) by the end of 2018. PIP is different from DLA and lots of people who were qualifying for DLA may not qualify for PIP. If get PIP, you could receive a lower rate than you are getting now.

Does having DLA or PIP make a difference to affordability?

In joint claims or if you’re working, yes. Remember the chances of getting a mortgage when your income consists solely of benefits are very low. If you have a partner who is working, or you are also working, lenders will consider your benefits as part of the household income. The change from DLA to PIP could trigger a stress point in your ability to sustain your mortgage. Lenders will consider Employment Support Allowance (ESA) awards (ideally Support Group with an award of at least 3 years). This varies from one lender to another.

I have a mortgage offer in principle, what else will I need?

You’ll need to factor in a deposit too and then all the extra costs, such as legal fees, stamp duty and insurances. Life insurance can be a problem and it’s essential when taking on a mortgage. You may have difficulties finding affordable cover when you have pre-existing conditions. You may need to contact several insurers to find a suitable product. The British Insurance Broker’s Association (BIBA) has a database you can search for local brokers.

Remember, as a homeowner you will be responsible for the maintenance and repairs to your home. These costs can be considerable so plan for unexpected costs, such as your boiler breaking down or the roof leaking.