This blog answers the question “Do benefits payments count as income for mortgage?” Benefit payments are generally need based and are set at levels which help to cover necessary costs. This blog looks at other sources of income for mortgage as well.

Do Benefits payments count as income for mortgage?

Benefit payments don’t count as income for mortgagees. Mortgage providers look more at the expenses and debt condition of a mortgagee and at their credit rating. When applying for a mortgage, your employment income can make a big difference, if you have a well paid, stable job it improves your chances for approval.

Claiming disability benefits such as the Personal Independence Payment or Attendance Allowance or any other benefits will not affect mortgage application decisions by the lender.

What is Support for Mortgage Interest?

Support for Mortgage Interest (SMI) is a loan to help you pay for the interest on mortgage payments. If you have enough equity in your property, you will eventually be paid back what you borrowed (either when your property is sold, its ownership is transferred or it forms part of your estate after your death)

You could get varying help from the SMI Loan in these 2 cases:

  • You receive Pension Credit. In this case, you can get help on paying interest up to £100,000
  • You don’t receive Pension Credit. In this case, you can get help on paying your mortgage interest loan up to £200,000

In most cases the SMI Payment is made directly to your lender, the interest is calculated at 2.09%(compounded interest rate)

You can be eligible for claiming the Support for Mortgage Interest (SMI) loan if you receive one of the following benefits:

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

Does getting a mortgage affect my universal credit payments and vice versa?

If you or your spouse own the house you live in and are eligible for universal credit, you can get a universal credit payment. This also applies if you live on shared property.

You must have benefits for 39 weeks without interruption. Additionally, you may not receive any of the following types of income:

  • any income from your job, 
  • a tax refund payment
  • Any Statutory sick pay (SSP)
  • Any Statutory Paternity pay (SPP)
  • Any Statutory adoption pay (SAP)
  • Any Statutory shared parental pay (Shpp)

These payments can help pay for the cost of purchasing your property, as well as the cost of repairs and maintenance.

If you own a rental property, it can also help you pay for service costs, including:

  • Costs for services shared by tenants
  • Costs of window cleaning
  • Repair and maintenance expenses

Can Universal Credit help me cover my mortgage payments?

Yes, Universal Credit can help you to cover your mortgage payments. It can also help with loans (up to £ 200,000) if you have a  Universal Credit contract which uses your property as collateral.

To get this help, you need to provide evidence of your mortgage agreement. This could be in the form of:

  • a copy of the mortgage agreement from your lender
  • an updated overview of mortgage payments
  • a loan repayment agreement
  • bank statements showing the payment of the mortgage amounts

Support with mortgage or loan repayments is provided as a loan. You will be asked to repay this loan only in case the property on which it was claimed is sold or transferred to someone else. If you buy a new home, you will have the choice of transferring the loan into it. You can also just repay the loan off early

The Employment and Pensions Department checks copies of your supporting documents before paying Universal Credit housing costs. Any delay in providing this evidence could result in delays in getting payments of your  Universal Credit accommodation costs.

The amount you receive depends on how much of your mortgage or loans are outstanding. It is calculated using a flat rate of interest and is usually paid directly to the bank, building society or lender. Your online Universal Credit account will keep you informed of the cost of your accommodation and your universal credit payment amounts.

What are Discretionary Housing Payments?

Discretionary Housing Payments are designed to provide you with extra (short-term) support in paying your rent. You must be claiming Housing Benefit or the housing element of Universal Credit first, to be eligible to receive Discretionary Housing Payments. Also, it must be first demonstrated that the financial help provided by Universal Credit and Housing Benefit is insufficient to cover rent payments in your case.

So the requirements to apply for Discretionary Housing Payments are:

  • Being on Housing Benefit or the housing element of Universal Credit
  • Being able to prove the existence of a shortfall between the amount of rent you have to pay and your benefits (plus the income and savings you might have leftover to cover rent payments)

The documentation evidence which will be looked into includes:

  • Your income and savings. This will be your monthly pay slips or income from shares or assets and the level of your current savings
  • Your current bank loans and debts (which could be mortgage debts, council tax debts or credit card debts)
  • Evidence of anyone being disabled or diseased in your family or household. This evidence can become the basis of a Discretionary Housing Payment award.
  • Evidence of you having to receive care at home for a disability.
  • Proof of how and on what you spend your income.

The Discretionary Housing Payment can be applied for online You will need to upload scanned copies of the following documents in your online form:

  • A copy of your most recent payslip. If you are working
  • A copy of your bank account statements from the past 2 months
  • Evidence of any loans you have taken, any credit card repayment agreement or any mortgage repayment agreement.
  • In case you are unwell you will need to provide copies of recent medical evidence from the NHS or your (registered) medical practitioner.
  • Copies of any letters you have received from your landlord about your rent arrears

Discretionary Housing Payment in the UK helps those people who are affected by:

  • The benefit cap ( A limit on benefits)
  • The abolishment of the spare room subsidy in the social rented sector
  • Local Housing Allowance (rent) rates

What are leaseholder’s rights?

Leaseholders have the following rights:

  • The right to extend their lease or to buy a freehold of a house (or housing association home) under the Leasehold Reform Act 1967
  • The right to extend their lease or to buy a freehold of a flat under certain conditions
  • The right to buy the freehold of a flat when it is sold, under the Landlord and Tenant Act 1967
  • The right to information regarding appealing service charges on their lease
  • The right to avoid repossession for owing ground rent or service fees to the landlord in case the unsettled charges are very low

What happens when I am a joint tenant and the other tenants stop making their mortgage payments?

A mortgage lender will always insist that borrowers are jointly and severally liable. This means that if one of you stops paying his part of the mortgage, the other (or others) will have to pay the full amount.

Both of you should talk about this situation. Before entering a tenancy agreement, always draw up a legal agreement called a declaration of trust that states when and how the property can be sold and how much notice to give if either of you decides to revoke the agreement. The more you have the right of first refusal to purchase the share from the owner who wishes to leave. You also need to decide how the net proceeds from the sale should be distributed.

What is Home Ownership for people with Long term Disability (HOLD)?

HOLD is a community housing program for people with long-term disabilities and is part of the UK government’s affordable housing program.

You could purchase a portion of your house for between 25% and 75% of the value of your property and pay the rent on the remaining part of it.You can only be eligible to apply for the HOLD program if the apartments in the other shared apartments schemes are not consistent with your needs

Am I eligible for the armed forces help to buy scheme?

To be eligible for the Forces Help to Buy program, personnel must meet the following criteria:

  • Be on regular service duty
  • Army and RAF personnel must have served two years from date of enlistment. The personnel should also have completed Level 2 training.
  • You have a minimum of 6 months of active service duty remaining
  • You not purchased any property within 50 miles of the proposed home purchase over the past one year

These personnel can apply for the armed forces loan online by using the Joint Personnel Administration (JPA) system and you can seek advice on its application through your chain of command and staff support detachment. The current scheme is active until 31st December 2022.

The Armed Forces Help to Buy scheme is an interest-free payday advance repayable over ten years.

Applicants to the scheme can borrow up to 50% of their salary and any Recruitment and Retention Allowance of a maximum of £25,000 in value

This borrowed money can be used for a down payment and other costs. .If you need more funds, you can also use the regular armed forces Help-to-Buy scheme.

The British Armed Forces Help to Buy scheme allows service members to borrow up to 50% of their salary (free of interest) for purchasing a new property or to shift residence

The following military service members can avail the Armed forces help to buy scheme:

  • All regular personnel who adhere to the mentioned seniority requirements
  • All regular personnel who have served for more than 6 months
  • All regular personnel who comply with the correct medical category requirements.

Conclusion

This blog post addressed the question “Do benefits payments count as income for mortgage?” Benefit payments will not be counted as income for mortgage applications and lenders do not consider or aim to investigate whether the home buyer gets any benefit payments or not. Claiming benefits and allowances is a private matter not to be disclosed to property lenders. Your credit history and rating will be closely scrutinized before approving your mortgage application.

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Frequently Asked Questions (FAQs) : Do Benefits Payments Count As Income For Mortgage?

Who can get a mortgage?

You are very likely to get a mortgage if:

  • You are employed in a full time job.
  • You can use your money efficiently
  • You have a sufficient level of savings
  • You can show that you have a good credit score rating

But as a first-time buyer, it can be more difficult to get a mortgage than for those who refinance. One reason for this is that you have a shorter credit history. This gives prospective lenders less evidence of whether you have been able to repay your loan installments on time.

Can I get a mortgage without a deposit?

You may be able to get a mortgage without a deposit, but it is rare

So-called 100% mortgages, which borrow 100% of the value of the property are rare. These mortgages charge very high interest rates. In these mortgages, lenders offer preferential interest rates to customers along with huge down payments.  The most competitive rates are  given to customers whose down payment is equal to 40% of the purchase price and to those with a loan-to-value ratio of 60% .

What counts as mortgage interest?

Deductible mortgage interest is any interest you pay on a loan secured by a primary or secondary home that was used to buy, build, or significantly improve your home. For tax years prior to 2018, the maximum amount of debt eligible for the deduction was $1 million. 

As of 2018, the maximum amount of debt is capped at $750,000. Mortgages existing on December 14, 2017 will continue to be taxed under the old rules. Additionally, for tax years prior to 2018, interest paid on up to $100,000 of home equity debt was also deductible. These loans include:

  • A mortgage to buy a house
  • A second mortgage
  • A line of credit
  • An equity loan

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