Can You Remortgage If You Are on Benefits?
Yes, it is possible to remortgage while receiving benefits, but your options will depend on several factors including the type of benefits you receive, whether you have any additional income, and the amount of equity in your property.
Lenders treat different benefits in different ways. Some benefits are widely accepted as income for mortgage purposes, while others are not accepted by most lenders. The distinction generally comes down to whether the benefit is considered a reliable, long-term income source or whether it could be reduced or withdrawn at short notice.
Benefits commonly accepted by lenders include:
- Child Benefit - Widely accepted by most mainstream lenders as supplementary income
- Child Tax Credits - Accepted by many lenders, particularly when combined with other income
- Working Tax Credits - Accepted by some lenders as evidence of income from employment
- Disability Living Allowance (DLA) - Accepted by many lenders as it is a long-term, non-means-tested benefit
- Personal Independence Payment (PIP) - Similar to DLA, accepted by many lenders
- Carer's Allowance - Accepted by some lenders as a regular income source
- War Disablement Pension - Generally accepted by lenders as a guaranteed income
Benefits that lenders are more cautious about include:
- Universal Credit - Varies significantly by lender and depends on the elements included
- Employment and Support Allowance (ESA) - Some lenders accept it, particularly the support group element
- Housing Benefit - Not usually accepted as income for mortgage purposes
- Jobseeker's Allowance - Rarely accepted as it is considered temporary
The amount of equity in your property is particularly important when remortgaging on benefits. A lower loan-to-value ratio can open up more options, as lenders view the mortgage as lower risk when there is more equity protecting their lending.
Which Lenders Accept Benefit Income?
The number of lenders willing to accept benefit income for remortgage applications varies considerably depending on the type of benefit. While lender criteria change regularly, here is a general overview of how the market currently approaches benefit income.
Mainstream high street lenders. Several major high street banks and building societies will accept certain benefits as part of an income assessment. These are typically the more established and widely recognised benefits such as Child Benefit, tax credits, DLA and PIP. However, each lender has its own specific criteria regarding which benefits they accept and how they calculate the income.
Building societies. Some building societies take a more individual approach to assessing applications and may be more flexible in considering benefit income. They often assess applications on a case-by-case basis rather than applying rigid automated criteria, which can work in favour of borrowers on benefits.
Specialist lenders. There are lenders who specialise in non-standard mortgages and may have more flexible criteria for accepting benefit income. While their interest rates may be higher than mainstream lenders, they can provide solutions when other options are not available.
It is important to understand that lender criteria in this area change frequently. A benefit type that one lender accepted last month may not be accepted next month, and vice versa. This is why working with a whole-of-market mortgage broker who stays up to date with current criteria is so valuable.
A broker authorised and regulated by the Financial Conduct Authority (FCA) will be able to search across the full range of lenders and identify those most likely to accept your specific combination of income and benefits. This targeted approach avoids wasted applications and unnecessary credit searches.
How to Strengthen Your Remortgage Application on Benefits
If you are remortgaging on benefits, there are several steps you can take to improve your chances of approval and potentially access better deals.
Maximise your equity. The more equity you have in your property, the better your options. Lenders are more willing to consider non-standard income when the loan-to-value ratio is low, as the property provides greater security. If possible, make overpayments on your current mortgage before applying to increase your equity.
Combine benefit income with other sources. If you have any other income alongside your benefits, such as part-time employment, a pension, or rental income, including all income sources will strengthen your application. Lenders are more comfortable when benefits form part of a broader income picture rather than the sole source of income.
Maintain excellent credit. A strong credit score is important for any remortgage application, but it is particularly crucial when your income is from benefits. Ensure all your bills and existing credit commitments are paid on time, and avoid applying for new credit in the months before your remortgage application.
Keep detailed records. Maintain records of all benefit payments, including award letters, bank statements showing regular payments, and any correspondence from the Department for Work and Pensions (DWP). Having comprehensive documentation ready demonstrates organisation and makes the lender assessment easier.
Reduce existing debts. Pay down credit cards, loans and overdrafts as much as possible before applying. Lower existing commitments improve your affordability assessment and show responsible financial management.
Consider a product transfer. If finding a new lender is proving difficult, your existing lender may offer you a new deal through a product transfer or rate switch. These are often available without a full income assessment, which can be advantageous if your income is primarily from benefits.
Seek specialist advice. A mortgage broker with experience in benefit-based applications will know which lenders to approach and how to present your application most effectively. This specialist knowledge can make the difference between approval and rejection.
