UC+mortgage: how are you paying the mortgage?

lukeylukeluke3

Hi folks.

From my understanding, UC won't pay for mortgage principle payments, only a seemingly unlimited ground-rent and service charges. A loan limited to £200,000 could be applied for to pay off the interest. 

So, for people who's entire income comes from benefits, how are they paying the principle payments? is it from their PIP, LCWRA and standard allowance elements?

I recently received a lump sum from my LCWRA tribunal ...and also a Section 21 notice from my landlord so I am wondering if I can finally break out of the rental trap.

I assume that if I was to do shared ownership and pay rent on the portion I don't own then I guess that would be aid in a similar way as would happen with me renting now. I am not sure about the mortgage payments element however. 

Caz3121

lukeylukeluke3 said:

 I am not sure about the mortgage payments element however. 

have you found a lender that will give you a mortgage based your benefits only?

silvercar

Doubtful if you would get a mortgage if your income is made up of benefits alone. Also the loan is restricted to a 2.65% rate, mortgage rates are generally higher at the moment. I doubt you would be able to show a lender that you could cover the mortgage. You also get charged interest on the loan and it is all repayable when the property is sold.

SMI is designed to help people out through a short term drop in earnings. It isn’t a long term solution to buying a home.

[Deleted User]

Maybe look at part buy part rent schemes? 
In addition to standard shared ownership there is HOLD Home Ownership for people with Long term Disabilities and there is also a older people age 55+ shared ownership scheme. You buy a 10 to 75% share of a home that is usually a new build but in some cases a older home. You will still need a deposit of 5 to 10% of the share you are buying. 

For a mortgage you maybe better off looking at building societies, as some at least used to not care about the source of income as long as it was regular and reasonably secure. So a longterm benefit award for a lifelong disability at least used to be fine. I do not know if any banks do the same. 

There are also some specialist HOLD Home Ownership for people with Long term Disabilities mortgage providers that provide mortgages to people on PIP or DLA. They can also help with shared ownership housing providers like housing associations who wrongly think only those in paid employment are eligible for shared ownership schemes. 

As SMI will only cover part of the mortgage interest you would need to make up the shortfall from your other benefits. Or possibly get a lodger. Rent from a lodger I think does not count as income in regards to Universal Credit. 

ManekiNeko

Hey @lukeylukeluke3,

I bought my apartment last year while on benefits (and my sole income is still from disability-related benefits), but my situation is quite probably different to yours. I was:

• Using a deposit made up of a) funds held in a Personal Injury Trust and b) a gifted deposit
• Signed off on long-term sick leave from my part-time job (e.g. still employed, 'just' off sick - although I subsequently decided to leave my job, this was many months after completion and not my original plan)
• On PIP (enhanced rate for both daily living and mobility)
• On UC with LCWRA

My impression from talking with my broker is that being employed but on sick leave was my saving grace in being able to get a mortgage, as there are a few lenders that will take 100 per cent of benefits income as income (which mine did), provided that you have a job as well. The exact job doesn't matter a jot, and working one day a week (or even half a day) seems to be enough - it's more about the status of being 'employed' vs. 'unemployed', if that makes sense. I don't thoroughly understand how part-time work is treated by UC, but I think you're allowed to earn a certain amount without it affecting your benefits income. (I'd like to know, though, if anyone else has more insight than me? Hoping to pick up some part-time work if/when my health improves.)

SMI - I would think you'd be eligible after a waiting period, although I'm not sure how long this is. A quick google says three months? So, you'd need to have a plan to cover the full mortgage payments until this kicked in. And tbf, I think it'd be worth asking CAB about SMI before basing your plans on it, as I don't know much about it. I do know that SMI pays out based on what it theoretically thinks your lender should be charging you in interest, not what it actually does charge - so you could be left short. Take all this with a truckload of salt, because I don't use SMI, I just pay my mortgage payments out of my income each month. I don't mentally divide up my income by whether it's PIP or UC or LCWRA, so I couldn't tell you what 'part' of my benefits I pay it from - I just write down the total income and then deduct all my bills off that total.

Service charge - UC do cover this, but there's a nine-month waiting period before they'll start. You need to have a plan to cover this in the meantime. Also, if you ever earn any money, even 1p, UC will restart that nine-month waiting period before they'll pay anything further. So, if you decide you're able to work, even a little bit, you'll need to do your sums carefully to ensure you'll be better off.

Lump sum - be wary with this, you should seek advice from CAB if it'll take you over the lower savings threshold of £6k (and I assume it might even take you over the upper threshold limit of £16k, if you're considering buying a home). If it's a backdated LCWRA payment, it'll be disregarded for 12 months.

HOLD - I did contact them, but got told that it's more designed for people who will never work again. My overriding impression was that if I wanted to return to work, I'd need to remortgage to facilitate that. So, I didn't go with them, because I'm still hopeful of being able to return to work in the future.

Buying advice in general - they say you should have about £6k to hand just to cover the costs of buying a home (so that's things like solicitors fees plus searches, broker's fee, survey, etc). Plus, it's always a good idea to have at least a few k to hand, just in case you get any issues (no landlord to fix things). I'm not saying buying is a bad plan - far from it, I obviously bought because I felt it was a good plan for me personally - but I was relatively short of cash afterwards. This was partly because I needed to buy a bunch of furniture - I was fine but my savings were depleted at that point, but then some unexpected plumbing issues got added to the mix, requiring some tools and parts. I've been so strapped for cash that my partner has actually been helping me with the cost of food for the past four months. With the benefits uprating in April, I think I can now take my food costs fully back over, but it hasn't been much fun and if it weren't for my partner, I would've been back at the food bank. I don't regret buying a home, but I do wish I'd bought some more tools gradually over the past few years to get more prepared. (As there's a limit to how much you can realistically save up when on benefits.)

Shared ownership - that's financially easier than buying outright, from what I've heard of it, although can introduce problems when selling (e.g. look carefully to see how easy it is to sell on). My understanding is that UC will pay the rent on the rental part of the house, up to the Local Housing Allowance (LHA) rate, and you'd be responsible for anything on top of that (if anything). I think UC probably cover the service charge as well (though, I haven't researched this as I didn't go this route). Evidently, you're then responsible for paying the mortgage part of the house yourself, out of your income.

HTH. Be interested to know what you decide.

lukeylukeluke3

ManekiNeko said:

Hey @lukeylukeluke3,

I bought my apartment last year while on benefits (and my sole income is still from disability-related benefits), but my situation is quite probably different to yours. I was:

• Using a deposit made up of a) funds held in a Personal Injury Trust and b) a gifted deposit
• Signed off on long-term sick leave from my part-time job (e.g. still employed, 'just' off sick - although I subsequently decided to leave my job, this was many months after completion and not my original plan)
• On PIP (enhanced rate for both daily living and mobility)
• On UC with LCWRA

My impression from talking with my broker is that being employed but on sick leave was my saving grace in being able to get a mortgage, as there are a few lenders that will take 100 per cent of benefits income as income (which mine did), provided that you have a job as well. The exact job doesn't matter a jot, and working one day a week (or even half a day) seems to be enough - it's more about the status of being 'employed' vs. 'unemployed', if that makes sense. I don't thoroughly understand how part-time work is treated by UC, but I think you're allowed to earn a certain amount without it affecting your benefits income. (I'd like to know, though, if anyone else has more insight than me? Hoping to pick up some part-time work if/when my health improves.)

SMI - I would think you'd be eligible after a waiting period, although I'm not sure how long this is. A quick google says three months? So, you'd need to have a plan to cover the full mortgage payments until this kicked in. And tbf, I think it'd be worth asking CAB about SMI before basing your plans on it, as I don't know much about it. I do know that SMI pays out based on what it theoretically thinks your lender should be charging you in interest, not what it actually does charge - so you could be left short. Take all this with a truckload of salt, because I don't use SMI, I just pay my mortgage payments out of my income each month. I don't mentally divide up my income by whether it's PIP or UC or LCWRA, so I couldn't tell you what 'part' of my benefits I pay it from - I just write down the total income and then deduct all my bills off that total.

Service charge - UC do cover this, but there's a nine-month waiting period before they'll start. You need to have a plan to cover this in the meantime. Also, if you ever earn any money, even 1p, UC will restart that nine-month waiting period before they'll pay anything further. So, if you decide you're able to work, even a little bit, you'll need to do your sums carefully to ensure you'll be better off.

Lump sum - be wary with this, you should seek advice from CAB if it'll take you over the lower savings threshold of £6k (and I assume it might even take you over the upper threshold limit of £16k, if you're considering buying a home). If it's a backdated LCWRA payment, it'll be disregarded for 12 months.

HOLD - I did contact them, but got told that it's more designed for people who will never work again. My overriding impression was that if I wanted to return to work, I'd need to remortgage to facilitate that. So, I didn't go with them, because I'm still hopeful of being able to return to work in the future.

Buying advice in general - they say you should have about £6k to hand just to cover the costs of buying a home (so that's things like solicitors fees plus searches, broker's fee, survey, etc). Plus, it's always a good idea to have at least a few k to hand, just in case you get any issues (no landlord to fix things). I'm not saying buying is a bad plan - far from it, I obviously bought because I felt it was a good plan for me personally - but I was relatively short of cash afterwards. This was partly because I needed to buy a bunch of furniture - I was fine but my savings were depleted at that point, but then some unexpected plumbing issues got added to the mix, requiring some tools and parts. I've been so strapped for cash that my partner has actually been helping me with the cost of food for the past four months. With the benefits uprating in April, I think I can now take my food costs fully back over, but it hasn't been much fun and if it weren't for my partner, I would've been back at the food bank. I don't regret buying a home, but I do wish I'd bought some more tools gradually over the past few years to get more prepared. (As there's a limit to how much you can realistically save up when on benefits.)

Shared ownership - that's financially easier than buying outright, from what I've heard of it, although can introduce problems when selling (e.g. look carefully to see how easy it is to sell on). My understanding is that UC will pay the rent on the rental part of the house, up to the Local Housing Allowance (LHA) rate, and you'd be responsible for anything on top of that (if anything). I think UC probably cover the service charge as well (though, I haven't researched this as I didn't go this route). Evidently, you're then responsible for paying the mortgage part of the house yourself, out of your income.

HTH. Be interested to know what you decide.

Thanks for the thorough insight

I am officially self employed but off sick long term. I wonder if that counts similarly to yourself. I had done a google for 'mortgage with benefits' and found onlinemortgageadvisor.co.uk yet despite having given my details twice I haven't been able to have anyone get back to me. I am wondering if your broker might be someone you'd recommend?

As for the allowance for income on UC, perhaps this helps?: https://www.gov.uk/government/publications/universal-credit-work-allowances/universal-credit-work-allowances

Given that you seem to have bought your property outright, I assume that the amount you are paying out of your benefits for the mortgage is a sizeable chunk?