A MORTGAGE provider has made it easier for anyone on Universal Credit or benefits to get a home loan.
Accord Mortgages has said it will accept the benefit as a source of income when assessing affordability for a home.
A mortgage provider said that it will accept the benefit as a source of income when assessing affordability[/caption]
This is provided that at least one other applicant is working and receives an earned wage.
Up to 60% of the Universal Credit amount will be considered, but this excludes housing allowance, service charges or the child element for kids aged over 11.
It comes as the group has also increased the loan-to-value (LTV) ratio for foreign national borrowers without indefinite leave to remain status.
It has been increased to 90% from the previous rate of 75%, and it is only applicable when the claimant has an income of over £50,000.
Both of the measures came into effect yesterday, August 28.
The move further widens access for wannabe homeowners, who may have struggled to get on the ladder.
Generally speaking, it can be harder to get a mortgage if you claim benefits, especially if you are unemployed.
This is because lenders may be worried that you do not have a secure income to make repayments.
If you are working and receiving benefits, you stand a better chance at getting accepted.
Your chances may improve further if the person you are taking out the loan with is in full-time employment.
But Nicholas Mendes, mortgage technical manager at John Charcol, described the move as a “real milestone”.
“The big positive here is that Accord is recognising UC as genuine household income, which gives more borrowers a fair shot at passing affordability.”
“On the downside, only 60% of UC is considered, housing allowance is excluded, and applicants still need earned income alongside it – so it won’t support those relying solely on benefits”
“By moving to take 60% of UC into account, Accord is signalling that it sees these payments as part of real household income.”
He added: “That’s a welcome shift, but it still comes with caveats: applicants need earned income alongside UC, and elements like housing allowance are excluded.”
Do any other lenders accept Universal Credit?
Right now, only a handful of lenders will consider Universal Credit, and even then, usually with strict limits.
“Many high street names, including Coventry, TSB and Metro Bank, won’t accept it at all,” according to Nick.
For example, Leeds building society accepts Universal Credit if there is a primary source of income on the application such as employed or self-employed income.
Meanwhile, Barclays may also consider the benefit depending on the circumstance.
But it said that housing element can only be considered when applying for shared ownership and the applicant must already be in receipt of the benefit.
Marsden Building Society also said it can potentially accept Universal Credit as an acceptable income type.
The bank said it can only accept 50% of Universal Credit, excluding any components relating to housing costs or unemployment.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
Mortgage guarantee scheme – The scheme opens to new 95% mortgages from April 19 2021. Applicants can buy their first home with a 5% deposit, it’s eligible for homes up to £600,000.