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Major bank makes big change to rules to help more people on Universal Credit buy a home
Plus we reveal the mortgage help you can get if you're struggling
A MAJOR high street lender has made a huge rule change to help Universal Credit households get on the property ladder.
Santander is now accepting Universal Credit payments when applying for a mortgage.
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Mortgage experts have described the change, which came into effect this week, as "good news" for low income households, who can find it hard to get a mortgage.
Universal Credit isn't just for those searching for a job. Around 40% of those on the benefit are in work, but are on a low income.
Budding buyers hoping to borrow with Santander will need to show that they have a main source if income from a job or being self-employed.
But their Universal Credit entitlement will also now count as secondary income for mortgage affordability purposes.
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When applying for a mortgage, banks look at a range of factors to decide if they will lend money to you and how much, including income.
You'll need to have your Universal Credit award letter and have been claiming for six months when applying.
Hopeful homeowners who claim Universal Credit can find it hard to get a mortgage, but it's not impossible.
Some banks refuse to lend to benefit claimants, but others will consider your application.
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Eligibility differs depending on the bank, and some will accept your application - depending on your financial circumstances.
Karen Noye, a mortgage expert at wealth management firm Quilter, said: "Lenders taking additional income like Universal Credit is good news for low income households, especially where the low income is due to having a young family and is more of a short term measure rather than long term.
"Different lenders have different criteria with additional income, some will only take it if is guaranteed for the term of the mortgage while others will consider it if it's likely to continue for say at least five years."
HSBC, Lloyds Banking Group, Natwest, Barclays and Nationwide will consider mortgage applications from benefit claimants including those on Universal Credit.
While Metro Bank will only accept Disability Living Allowance (DLA), Personal Independence Payment (PIP) and the State Pension as income.
DLA and PIP are available for people who have extra care or mobility needs because of a disability or health condition.
Whether or not your application is successful will depend on whether you have other types of income or assets as well as the benefits.
You'll have to prove that you can keep up with the repayments.
Some banks will include specific conditions in their offer, such as only allowing you to use a certain percentage of your benefit payments to cover the mortgage.
A mortgage adviser can help you find a suitable provider who will consider your application.
They'll also be able to find the best value deal for you.
Remember though, they'll take a fee for their services so you'll need to factor that into your costs.
Can I save for a home if I'm on Universal Credit or benefits?
Wannabe homeowners will need to have a deposit to put down on the home too.
Being on benefits doesn't make it impossible to save some cash, and there are even some accounts designed to help you save.
But with some benefits there are rules on how much you can save.
For instance on Universal Credit, any savings you have up to £6,000 is ignored under the Department for Work and Pension (DWP) rules.
Money you have over this amount but under £16,000 will be counted when assessing your eligibility for Universal Credit payments.
Before you start saving it's worth checking first how these rules might affect you, so you don't lose payments unexpectedly or have the amount reduced.
There are certain saving accounts that can help you save for a deposit too - with extra cash top-ups from the government.
Help to Save is a type of savings account dedicated to those on certain benefits.
It's for any savings, not just buying a first home.
Under the scheme, the government gives you 50p for every £1 you save into your account over four years.
You are allowed to save between £1 and £50 each calendar month and pay the money in via standing order or bank transfer.
You can then withdraw any bonus you've received at the end of the second or fourth year.
If you put the maximum £50 in for the four-year period it means you would get £1,200 in free cash from the government.
What is a mortgage and how do I apply?
A MORTGAGE is a loan that you can use to help you buy a property.
On average, a mortgage lasts for 25 years but can last anywhere between six months to 50 years.
You'll make monthly payments to pay off your mortgage.
One important thing to bear in mind is that a mortgage is secured against your property so if you fail to pay it you could lose your home.
A mortgage is essentially a loan used to buy a house, so you'll need to apply for one from a bank or another lender.
You can apply for a mortgage once you've found the house you want to buy. That way you will know how much you need to borrow.
You'll need to save a deposit before you can get a mortgage.
The average for first-time buyers is £50,000, but the amount can depend including where you live and the value of the house you want to buy.
But it's not impossible to raise the funds without the bank of mum and dad, like Ethan Bragginton from London who managed to buy a £135,000 house by the time he was 18.
Lenders will also look at your credit score before they decide to lend to you, so it's important that you've got a good score before you apply.
On top of this, you may also need to provide documents like utility bills, proof of benefits, your last three month's payslips, passports and bank statements.
Of course, what kind of mortgage you can afford will depend on your financial situation.
This includes your earnings, how much you spend a month and the deposit you have put down on the property you're purchasing.
A lifetime ISAs (LISAs) is a savings account that lets you put away up to £4,000 every tax year.
Anyone between 18 and 39 can open one and you can keep adding money until you are 50, but must make your first payment into one before the age of 40.
The big perk is that you get a 25% bonus on top of any personal contributions.
So if you added £4,000 into one this tax year, you would get another £1,000 free from the government.
It's not just for those on benefits, but the money saved must either be for buying a home, or for retirement.
If it's used for anything else, you may face a withdrawal fee that could leave you with less money than you put in.
Checkout more schemes to help first-time buyers get on the property ladder.
Mortgage help if you're on Universal Credit or benefits
Those on benefits who already have a mortgage may get specialist help through a little known scheme if they are struggling.
As soon as you think you will have a problem with your monthly mortgage repayment - whether you can't pay anything, can't pay all of your monthly payments, or can't pay it on time - get in touch with your lender immediately though.
They have certain schemes in place to help you if you're struggling.
Under the government's Mortgage Charter, you can temporarily ask to switch your mortgage to interest-only, or extend your term to bring monthly payments down.
Support for mortgage interest or SMI helps those on Universal Credit - and other benefits - by giving them a low-interest loan.
The help goes towards mortgage payments or towards loans taken out to help repair any damage to the home.
SMI is a loan that you will need to repay with interest when you sell your home.
You'll get help paying the interest on up to £200,000 of your loan or mortgage.
But you'll only get up to £100,000 if you're getting Pension Credit.
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The interest added to the loan can go up or down, but the rate will not change more than twice a year - the current rate is 3.03%.
Contact the office that pays your benefit to find out if you could get an SMI loan.
How to get free debt help
THERE are several groups which can help you with your problem debts for free.
- Citizens Advice - 0800 144 8848 (England) 0800 702 2020 (Wales)
- StepChange - 0800138 1111
- National Debtline - 0808 808 4000
- Debt Advice Foundation - 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations - don't be tempted to use a claims management firm.
They say they can write-off lots of your debt in return for a large upfront fee.
But there are other options where you don't need to pay.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Facebook group to share your tips and stories.
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