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Finding an Affordable Mortgage When Disabled

By: Emma Eilbeck BA (hons) - Updated: 20 Jul 2017 | comments*Discuss
 
Disabled Mortgage Lender Home Smi Afford

For the many hundreds of thousands of people who are disabled in the UK, obtaining a mortgage can be a difficult task.

The biggest hurdle many disabled people face is a lack of regular income to satisfy a lender’s demands.

There are a number of schemes that are designed to help those with disabilities, such as the Support for Mortgage Interest scheme, but unfortunately these are not doing enough to help more disabled people onto the housing ladder.

Getting a Mortgage when Disabled

Owning your own home when disabled is often the best solution economically and practically. Paying off a regular mortgage gives the person a sense of independence, makes them less reliable on others and gives them a sense of security.

But because of some of the factors related to disability it can sometimes be impossible for lenders to consider this type of borrower for home ownership.

The main factor a lender will take into consideration is whether you can afford the mortgage. Unfortunately mortgage lenders do not show any favouritism towards those with disabilities. Many people who have disabilities whether small or large need to rely on a parent or guardian to act as a guarantor for the mortgage, so if they cannot work for any reason the mortgage payments will be covered.

The new rules that the financial regulator is introducing for the mortgage market means it could be harder for those with disabilities to get a mortgage because it will not just be their job that is taken into account but other factors, such as the health of the applicant and what other outgoings they have, such as the cost of care.

What Help is Available

The Support for Mortgage Interest scheme acts as a vital lifeline for disabled people paying their mortgage.You will qualify for SMI if you claim either income support, income-based jobseeker’s allowance, income-related employment support allowance or pension credit.

Up until October 2010 the rate of SMI was calculated at 6.08%, which means your payments would be calculated on the assumption that the interest rate you were paying on your mortgage was around this level. Any excess there may have been would have been credited to you account.

But from October 2010, the rate of SMI has been calculated at 3.63%, which means if the interest rate charged by your lender is more than this, the SMI payment may not cover it.

This has had a huge impact on the disabled community and is making it very hard for a lot of them to pay the interest on their mortgage, especially those on higher rates.

What Else Can be Done?

In the end it all boils down to lenders’ reluctance to lend to someone they view as a risk or someone who will not be able to repay the mortgage.

A number of schemes have been launched over the years to try and find a solution to this, such as one scheme called MySafeHome, which offered a shared ownership type deal for those with disabilities, but with an increasing number of mortgage lenders pulling out of the market and the uncertainty over the mortgage market, such projects have had to take a back seat.

There have not been many positive signs coming from the government that they have anything up their sleeves in order to help those with disabilities. Until the mortgage market frees up again it looks unlikely that it will be an area of focus for the government, which is a shame.

Unfortunately the reality of owning their own home will remain just a pipe dream for many people with disabilities, but there are ways to make it possible.

Help from family members to act as guarantors can offer a boost in terms of being accepted for a mortgage and it is worth speaking to your local housing association to see if you qualify for any of their shared ownership schemes.

Ultimately a lender will want to know you can afford your mortgage and monthly payments, if you can prove this, you are on the path to affording your own home.

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[Add a Comment]
Neri yah - Your Question:
I am on pip an need a mortgage iGet middle rate for care would I be in able to get a mortgage ?

Our Response:
If you can afford a mortgage, banks and other lenders are not allowed to reject your application just because you are disabled, please see link here.
AffordableHomeAdvice - 21-Jul-17 @ 12:22 PM
I am on pip an need a mortgage i Get middle rate for care would I be in able to get a mortgage ?
Neri yah - 20-Jul-17 @ 6:35 PM
I already have a mortgage at 4.25% interest, however due to my health and disability I had to stop working in Aug 2015 and I am now on esa support group (part contribution and part income based), and standard rates for PIP mobility and care. Over the years I have reduced my mortgage balance from £57k to £36k. As my income is reduced, I want to mortgage onto a lower interest rate with a shorter mortgage term than at present, so that if the interest rates do rise I can still afford the mortgage repayments. Sensible idea I thought, but no one will take both benefits into account as I am single, and so all the income is benefit income. I have been on disability benefits for almost 10 months and still met all my mortgage, credit and other bill monthly payments without a hitch, by sticking to a strict budget. And even though I have proved I can afford £100-200 more per month than the monthly payment on a lower interest rate mortgage I am still unable to mortgage, even though there is over 50% equity in my house. Does any one know a sensible lender with common sense who will take disability benefits into account?
Frustrated - 20-May-16 @ 10:55 PM
I already have a mortgage at 4.25% interest, however due to my health and disability I had to stop working in Aug 2015 and I am now on esa support group (part contribution and part income based), and standard rates for PIP mobility and care. Over the years I have reduced my mortgage balance from £57k to £36k. As my income is reduced, I want to mortgage onto a lower interest rate with a shorter mortgage term than at present, so that if the interest rates do rise I can still afford the mortgage repayments. Sensible idea I thought, but no one will take both benefits into account as I am single, and so all the income is benefit income. I have been on disability benefits for almost 10 months and still met all my mortgage, credit and other bill monthly payments without a hitch, by sticking to a strict budget. And even though I have proved I can afford £100-200 more per month than the monthly payment on a lower interest rate mortgage I am still unable to mortgage, even though there is over 50% equity in my house. Does any one know a sensible lender with common sense who will take disability benefits into account?
Frustrated - 20-May-16 @ 10:55 PM
sarah - Your Question:
Hi, I receive, esa, highest rate for both components of PIP and severe disability payment and my partner works full time but are struggling to find a lender as we have a very small deposit do far

Our Response:
Please see gov.uk link to; Support for Mortgage Interest (SMI) link here. I hope this helps.
AffordableHomeAdvice - 7-Aug-15 @ 2:47 PM
Hi, I receive, esa, highest rate for both components of PIP and severe disability payment and my partner works full time but are struggling to find a lender as we have a very small deposit do far
sarah - 7-Aug-15 @ 12:40 PM
Hi I'm on high rate mobility and we are trying to find a house to rent but having trouble as the landlords won't take on dss would I be able to apply for a mortgage at all
Caz - 25-Jun-15 @ 11:52 AM
@Wullie - Apart from the information in the article, I'm afraid we can't recommend specific banks or building societies. Only a few will allow mortgages on receipt of benefits as the likes of DLA is subject to variation. You would have to do an online search and contact them individually.
AffordableHomeAdvice - 4-Mar-15 @ 1:03 PM
Hi I recieve Middle rate mobility and top rate for care. However I cannot find any lender prepared to lend me 30,000 with 5000 deposit. Can anyone tell me were I could get advice or a lender who maybe able to help?
Wullie - 2-Mar-15 @ 11:25 AM
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