Major bank makes rule to help Universal Credit households get onto the property ladder
A major high street lender has introduced a huge rule change to help Universal Credit households get onto the property ladder.
Santander now accepts Universal Credit payments as a secondary income for mortgage affordability.
Universal Credit is a social security scheme designed to combine several of the old “legacy benefits” into a single monthly payment.
Mortgage experts have described the change, which came into effect this week, as ‘good news’ for low-income households, who may find it difficult to get a mortgage.
Prospective buyers looking to borrow from Santander will need to prove they have a primary source of income in addition to their Universal Credit entitlement.
This can be done through a job or as a self-employed person.
This information must be clearly stated in the Universal Credit award letter and you must have been making a claim for six months.
Hopeful homeowners claiming Universal Credit may find it difficult to get a mortgage, but it’s not impossible.
Some banks refuse to grant loans to benefit recipients, but others will consider your application.
Eligibility varies depending on the bank, and some will accept your application depending on your financial circumstances.
That’s because they’re concerned about a borrower’s ability to repay their mortgage.
Karen Noye, a mortgage expert at asset management company Quilter, said: ‘Lenders offering additional income, such as Universal Credit, are good news for low-income households, especially where the low income is due to having a young family and more of a is a short-term measure. rather than in the long term.
“Different lenders have different criteria regarding additional income. Some will only accept it if it is guaranteed for the life of the mortgage, while others will consider it if it is likely to last at least another five years.”
How to get the best deal on your mortgage
If you’re looking for a traditional mortgage type, getting the best rates depends entirely on what’s available at any given time.
There are several ways to get the best deal.
Typically, the larger the down payment, the lower the interest rate you can get.
If you take out a new mortgage and your Loan-to-Value ratio (LTV) has changed, you will have access to better rates than before.
Your LTV decreases if your outstanding mortgage is lower and/or the value of your home is higher.
A change in your credit score or a better salary can also help you access better rates.
And if you’re nearing the end of a standing deal soon, it’s worth looking for new deals now.
You can sometimes lock in current deals up to six months before your current deal expires.
If you leave a fixed deal early, you’ll typically be charged an exit fee, so you’ll want to avoid these additional fees.
But depending on the cost and how much you can save by switching or staying, it may be worth leaving the deal, but compare the costs first.
Use one to find the best deal Mortgage comparison tool to see what’s available.
You can also contact a mortgage broker who can compare a much wider range of offers for you.
Some charge an additional fee, but there are plenty who provide free advice and are paid only on the lender’s commission.
You will also need to consider mortgage costs, although some may not have any costs at all.
You can add the costs (sometimes more than € 1,000) to the costs of the mortgage, but keep in mind that you will pay interest on it and will therefore cost more in the long term.
You can use a mortgage calculator to see how much you can borrow.
Please note that you will also need to meet the lender’s strict criteria, including affordability checks and viewing your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three months’ pay slips, passports and bank statements.
HSBC, Lloyds Banking Group, Natwest, Barclays and Nationwide will consider mortgage applications from benefit claimants, including those on Universal Credit.
While Metro Bank only accepts Disability Living Allowance (DLA), Personal Independence Payment (PIP) and State Pension as income.
DLA and PIP are available for people who have additional care or mobility needs due to a disability or health condition.
Whether your application is successful depends on whether you have any other income or assets and on the benefits.
You must demonstrate that you can keep up with the repayments.
Some banks will include specific conditions in their offer, for example that you may only use a certain percentage of your benefit to cover the mortgage.
Find a mortgage advisor who will help you find a suitable provider who will consider your application.
They can also find the best deal for you.
However, keep in mind that they charge a fee for their services, so you should factor that into your costs.
What other mortgage assistance is available?
As soon as you think you may have a problem with your monthly mortgage payment (whether you cannot pay anything, cannot pay your monthly payment in full or cannot pay it on time), contact your lender immediately.
They have certain arrangements in place to help you if you are having a hard time.
You can ask your lender about the breathing space arrangement if you feel that payments are unaffordable.
Under the breather program, none of your debts will accrue interest and you will not be charged any fees for 60 days.
You are protected against collection agencies and bailiffs.
You may also be able to request a payment holiday; then you don’t have to pay anything.
But interest and fees may still accrue, and missed payments will have to be made up in the future.
Each company has different policies, so you will need to contact us to find out what support is available to you.
Mortgage Interest Support or SMI helps people on Universal Credit (and other benefits) by giving them a low interest loan.
The assistance goes towards paying the mortgage or towards loans taken out to help repair any damage to the home.
SMI is a loan that you must repay with interest when you sell your home.
You will receive help with paying the interest on a maximum of € 200,000 of your loan or mortgage.
But you only get a maximum of £100,000 if you get a pension credit.
The interest added to the loan can go up or down, but the interest rate will not change more than twice a year – the current interest rate is 3.03%.
Contact the office that pays your benefits to see if you can get an SMI loan.
There are also several charities and services that offer free help and advice if you are worried about money.
It is always best to contact one of these services before thinking about debt consolidation or hiring a debt advisor who will likely charge you.
Citizens Advice is a free and impartial service that helps you come up with a plan to pay off your debts, including which payments to prioritize and how to reduce your living costs.
There is one on the organization’s website useful page with advice about many aspects of debt, but you can contact them directly by phone, online or in person for more personalized help.
StepChange is another free advice service that offers support and guidance online or over the phone, and is completely confidential.
You’ll need to provide details about your debts, income and household expenses to get a clear picture of where your money is going.
Where possible, their advisors will help you come up with a plan to repay all your debts, but in a way you can afford.
National Debtline is a charity offering free and confidential advice to people in England, Wales and Scotland.
You can contact them online or by telephone on 0808 808 4000, Monday to Friday from 9am to 8pm and on Saturday from 9.30am to 1pm.
An advisor will help you figure out what you can pay back and help you determine the best solution for your debts.
Do you have a money problem that needs to be solved? Get in touch by emailing money@the-sun.co.uk.
Moreover, you can join us Sun Money chats and tips Facebook group to share your tips and stories.