Getting a mortgage if you're disabled
Many disabled people have to rely on benefits to make up their income. This shouldn't stop you from getting a mortgage. This page looks at the kind of things you'll need to consider when applying for a mortgage and how you can get help to pay your mortgage interest.
What do I need to think about?
How much you can afford - when you're thinking about getting a mortgage, the first thing you need to do is work out how much you can afford to repay each month. If you think you can't afford a mortgage you could consider buying through a shared ownership scheme.
Being well prepared - banks and building societies will turn down mortgage applications from you if they think you won't be able to keep up the repayments. So it's important to be well prepared when you go to the bank to apply for a mortgage. Get details of all your income and if you're on benefits, bring details of how much you're receiving or will be eligible to receive.
Drawing up a budget - this should list all your sources of income and all the things you regularly spend money on and show how you will fit your mortgage repayments into this budget. Housing Options Scotland may be able to help you put a budget together.
Our page on buying a home if you're disabled has more information.
Who can I talk to?
You can get information and advice about mortgages from various sources:
- Bank or building societies - most banks and building societies have a mortgage adviser who will be happy to discuss your mortgage needs with you. All lenders need to produce information about their financial services in Braille or other accessible formats, and they should be able to make home visits if you're not able to come into a branch.
- Financial advisers - if you'd like someone to shop around for you, get in touch with an independent financial adviser (IFA), mortgage broker or other specialist. They may be able to find a deal that's suitable for you. IFAs and brokers may charge a fee for their services, but this is often paid by the bank and then included in your mortgage.
- Money advisers - you can also get help from a money advice centre - you'll find a list of these at the Money Advice Scotland website.
- Specialist advisers - for specialist advice on how to buy a home if you rely on benefits as your main source of income contact DIAL or Housing Options Scotland.
Applying for a mortgage if you're on benefits
If benefits are your main source of income and you want to buy a home that's suitable for your needs as a disabled person, you may be able to get housing cost payments to help you do this. If you receive, or are eligible to receive: income support, income based jobseeker's allowance, or pension credit (guarantee element), you should be able to get help paying the interest on your mortgage. This applies even if you are already receiving benefits when you apply for your mortgage.
These payments can be used to pay:
- interest on your mortgage loan
- interest on any other loans which you take out to carry out repairs or adaptations to your property to make it more suitable for your needs
- service charges.
Restrictions on the help you can receive
Housing cost payments only pay the interest on the mortgage and not the capital. You need to pay all of the capital yourself. The following restrictions apply:
- you can only get help with the interest on mortgage loans of up to £200,000, plus the cost of any adaptations.
- how much you receive may be restricted if the Department of Work and Pensions (DWP) decides that your home is too big for you or is in an unnecessarily expensive area. In this case, you may only receive the amount of money the DWP thinks is reasonable for your needs.
To make sure that you receive the correct amount of benefit you should explain to the DWP if:
- you need a larger home, for example, because you have a live-in carer, or
- you need to live in a particular area, for example to be near your family, or a hospital or medical centre where you receive treatment.
Your housing cost payments may be mistakenly restricted if:
- you were previously living in rented accommodation and claiming housing benefit, and
- you have now bought your own home and are applying for housing cost payments to pay your mortgage interest.
In this case you may only get the same amount in housing cost payments as you previously received in housing benefit. However, this restriction should not be applied if you are buying a house more suited to the needs of a disabled person than the one you currently live in.
How do I apply?
When you apply for benefits you'll need to include in your application exact details of your mortgage and housing costs to get the extra payments. You'll need proof of your income, details of your financial situation and any related paperwork. Your lender will also need to complete forms confirming the details of your loan. The section on benefits has more information on how to apply.
If you are already receiving these benefits but are not getting any extra payments towards your housing costs, contact your local Jobcentre Plus office or the Pension Service and ask them to send you a form. Call the Benefits Enquiry line on 0800 882 200 or textphone 0800 24 33 55 for general advice or to ask for leaflets and claim forms.
When you receive your first housing cost payment, it will be backdated to the date you first applied. This payment will be made straight to your mortgage lender. Make sure your mortgage lender knows that this will happen and that they don't charge you an early redemption penalty for paying too much into your mortgage!
I'm claiming housing cost payments - how do I repay the capital?
If you are claiming housing cost payments or have an interest only mortgage, you'll still need to think about how to pay back the capital. You may do this by:
- paying into an endowment or Individual Savings Account (ISA) fund
- using wages, benefits or contributions from your parents or other family members.
You should seek specialist benefits advice to make sure that the money you save to repay the capital does not effect your benefit entitlement.
What if my application is turned down?
Unfortunately, lenders may well turn down your request for a mortgage if you are not receiving a regular wage and rely on benefits for part of your income. This may be because they exclude certain benefits as a source of income, or because they don't know how benefits for disabled people (such as housing cost payments) work.
Mortgage lenders often ask disabled people to provide extra information about their income and expenditure. They may then use this information to turn down your application because they think you can't afford to make the mortgage repayments.
If one mortgage lender turns you down, try a different one. Be persistent. However, if you think a lender is turning you down specifically because you are disabled, this is discrimination, and you may be able to take action against them.
What are my rights under disability discrimination law?
Under the Equality Act, banks, building societies and other financial institutions must take steps to ensure that you can access their services. This may mean:
- making their premises physically accessible, for example by installing a ramp or lift
- providing information on their services in alternative formats, such as Braille or large print, or through an accessible website
- arranging for someone to interpret for you using British Sign Language
- helping you with written forms
- allowing you to submit information to them in a convenient format, for example by email or over the phone if you have problems coming into their office.
If you have enough income to afford a mortgage, you cannot be refused a mortgage on the grounds that you are disabled. This is against the law. If you are offered a loan, lenders cannot insist that you accept extra terms that they wouldn't expect a non-disabled applicant to accept. For example, you shouldn't be asked to pay a larger deposit, or to make larger monthly repayments.
Mortgage lenders are allowed to turn down applications if they think the applicant won't understand the nature of the contract and the responsibilities it entails. However, lenders can't refuse or restrict their services to anyone acting legally on the disabled person's behalf, such as a relative or partner.
What can I do if a lender discriminates against me?
If you think a mortgage lender is discriminating against you, you can take action under the Equality Act. You'll need to prove that the reason the lender turned you down or treated you badly was specifically linked to your disability and was not, for example, to do with financial instability. Housing Options Scotland can help you make your case.
Our pages on dealing with disability discrimination have more information.
Will I be able to get insurance?
When you take out a mortgage, you may also want to take out mortgage protection insurance. There are several different kinds of protection you can get:
- Life assurance - this pays off your mortgage if you die, so it's important to get this if you have a partner, children or other dependants.
- Accident, sickness and unemployment insurance (ASU) - this covers you if you are unable to pay your mortgage due to illness or redundancy.
When you are taking out insurance, take care to read all the small print and make sure it will cover you. Many insurers will not pay out if you become ill due to a condition or disability that was already in existence when you took out the policy, while other insurers may not cover you at all, or may charge much higher premiums.
However, there are special rules governing when an insurance company is justified in refusing to provide cover for a disabled person, or when they can charge a higher price. The insurer's reason for doing this has to be based on medical evidence about you as an individual, not on stereotypical assumptions about disabled people. Therefore if you have an illness, the insurance company should get medical evidence about how this impacts upon you and make any decision based on that evidence and any actuarial data about your condition and the real risks involved.
If you are having problems getting insurance, an IFA or insurance broker should be able to help you find a suitable policy, although they may charge a fee for this.
What if a member of my family is a disabled person?
If a member of your family is a disabled person and you want to move to a new home that is more suitable for your needs, you should be able to claim housing cost payments to help pay your mortgage interest, provided you are eligible for income support, income based jobseeker's allowance or pension credit (guarantee element).