When applying for a mortgage, understanding what constitutes additional income can be crucial in determining your eligibility and the amount you can borrow.
Many people are unaware that certain government benefits can be considered as additional income. This guide will break down the various benefits that can be included and how they impact your mortgage application.
Benefits That Count as Additional Income
Several benefits can be considered as additional income when applying for a mortgage. These include:
- Attendance Allowance: This benefit is provided to people who need help with personal care due to disability.
- Carer’s Allowance: Offered to those who spend a significant amount of time caring for someone with substantial care needs.
- Child Benefit: A payment made to parents or guardians to help with the cost of raising children.
- Disability Living Allowance (DLA): Financial assistance for those with disabilities to help with extra costs.
- Incapacity Benefit (IB): Given to people who are unable to work due to illness or disability.
- Industrial Injuries Benefit (IIB): Available to those who have been injured or have become ill as a result of their work.
- Maternity Allowance: Provided to pregnant women who do not qualify for statutory maternity pay.
- Pension Credit: Aimed at supplementing the income of retirees.
- Employment & Support Allowance: If you have a disability or health condition that affects how much you can work
- Severe Disablement Allowance: For individuals who are unable to work due to severe disability.
- Bereavement Support Payment (BSP): A benefit that can be awarded to people under state pension age if their husband, wife or civil partner dies
These benefits can significantly bolster your income, making it easier to qualify for a mortgage and potentially increasing the amount you can borrow.
Universal Credit and Its Impact on Mortgage Applications
For most people, the following benefits are now provided as part of your Universal Credit payments and also count as additional income:
- Income-based Job Seeker’s Allowance
- Income-related Employment and Support Allowance
- Income Support
- Working Tax Credit
- Child Tax Credit
- Housing Benefit
If you are eligible and receive any of the above, they will now be provided as one lump-sum payment through Universal Credit instead of separate payments. This can simplify your finances and assist in demonstrating a stable income stream to lenders.
Long-term vs. Short-term Benefits
It’s worth considering that lenders will likely favour long-term government payments over short-term ones that could end at any time. Long-term benefits provide a more reliable source of income, which is more appealing to lenders. This stability can improve your chances of being approved for a mortgage and might even lead to more favourable terms.
Government benefits can play a significant role in your mortgage application by serving as additional income. Understanding which benefits are considered and how they are evaluated can help you present a stronger case to lenders.
Always ensure to provide accurate and comprehensive information about your benefits when applying for a mortgage to maximise your chances of approval. If you are receiving Universal Credit, the consolidation of various benefits into one payment can simplify the process and provide a clear picture of your financial situation to potential lenders.
By being informed and proactive about how your benefits can impact your mortgage application, you can take steps to improve your financial standing and secure the home loan you need. Always consult with a mortgage advisor to understand how your specific benefits and financial situation will be assessed.
