can I get a mortgage while on income protection?
Yes, it is possible to get a mortgage while you are receiving income protection payments, but there are some important considerations to keep in mind. Lenders will assess your financial situation carefully to determine whether you can afford the mortgage repayments. Here’s what you need to know:
Income Assessment
Income Source:
Lenders will want to know the source of your income. If you are receiving income protection payments, this income is typically considered by lenders, but it may be scrutinized more closely than regular employment income.Proof of Income:
You will need to provide evidence of your income protection payments, including the amount you receive, the policy terms, and how long the payments are guaranteed. Lenders will assess this to ensure your income is stable and sufficient to cover the mortgage repayments.Lender Criteria
Varied Policies:
Lenders have different policies regarding income protection payments. Some may accept these payments as a valid source of income, while others may apply stricter criteria or limit the amount they are willing to lend.Affordability Checks:
Lenders will conduct affordability checks to ensure you can manage the mortgage payments alongside your other financial commitments. They may also assess whether your income protection payments will continue long enough to cover the mortgage term.Mortgage Type
Fixed-Term vs Permanent Income Protection:
If your income protection is for a fixed term (e.g., 1 or 2 years), lenders may be more cautious as this income is not guaranteed in the long term. Permanent income protection, which pays out until retirement age or until you return to work, may be viewed more favourably.Mortgage Length:
The length of the mortgage term may also be a factor. Lenders may be more willing to offer a mortgage if your income protection payments are guaranteed for a significant portion of the mortgage term.Credit History
Creditworthiness:
As with any mortgage application, your credit history will play a crucial role. A strong credit history can help mitigate any concerns lenders might have about your income source, making it easier to secure a mortgage.Debt Levels:
Lenders will also look at your overall debt levels and how well you have managed your finances while on income protection. High levels of debt or missed payments could negatively impact your application.Deposit and Loan-to-Value (LTV)
Larger Deposit:
Offering a larger deposit can make you a more attractive borrower to lenders, as it reduces their risk. A lower loan-to-value ratio (LTV) may increase your chances of being approved for a mortgage.Mortgage Rates:
Be aware that you may be offered a higher interest rate if your income protection payments are seen as less stable than regular employment income. A larger deposit can help secure a more favourable rate.Specialist Lenders
Consider Specialist Lenders:
If mainstream lenders are reluctant to offer you a mortgage, consider approaching specialist lenders who may have more experience working with borrowers on income protection or other non-standard income sources.Conclusion
Getting a mortgage while on income protection is possible, but it may require more careful planning and consideration. Lenders will want to be assured of your ability to meet mortgage repayments, so providing clear evidence of your income protection payments and having a strong credit history will be important. Consulting with our mortgage adviser who understands your situation can help you navigate the application process and find lenders that are more likely to accommodate your circumstances.
Answered by:
Natalia Barry
Mortgage and Protection Consultant
Last Updated:
07.08.2024
Answered by:
Natalia Barry
Mortgage and Protection Consultant
Last Updated:
07.08.2024
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