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Parents can claim child benefit for raising a child under 16, or under 20 if in education and training. Paid every four weeks, all UK parents can claim this state benefit, but, for those on incomes over £50,000, there are tax implications.
As well as this, you may want to know if child benefit can be declared as income on a mortgage application to bolster affordability - read on to find out.
Do mortgage lenders take child benefit into account?
Yes. There are mortgage lenders that will account for child benefit and child tax credits, as well as other benefits, in their affordability calculations - but not all of them will do this.
Your lender will want to see evidence that you receive child benefit, and they may limit the amount of income that comes from benefits in their calculation.
It's a good idea to seek advice from an experienced mortgage broker when it comes to applying for a mortgage on benefit income. This will boost your chances of approval as they'll know the ideal lenders to approach and can help maximise your borrowing power.
How lenders assess child benefit income
Some lenders won’t allow you to declare any of your child benefit, and many of those that do have specific criteria for this income type, including the following:
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Age of the child: Some lenders will only allow you to declare your child benefit income on your application if your child is under a certain age, typically 11-14.
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Total amount of income: There are lenders who will only include your child benefit income in their affordability calculations if your total income is below £50-60k.
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Time remaining on the benefit: Some lenders will only let you include your child benefit if you can continue claiming it for a certain amount of time, typically five years.
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Main income available: You are unlikely to get a mortgage, however small the amount you need to borrow, if child benefit is your only type of income. Most lenders insist that it can only be declared as supplemental alongside a main source of capital.
Proving child benefit income to a mortgage lender
You will need to provide three months’ worth of bank statements showing the child benefit arriving in your account. Some lenders will also request a letter or statement from the Department for Work and Pensions (DWP) confirming that you are receiving the benefit.
Why you need a mortgage broker
If you are planning on using child benefit on your mortgage application, speaking to a broker before you proceed will boost your chances of successfully declaring 100% of your income.
Our mortgage brokers have deep working relationships with lenders who allow borrowers to declare all of their child benefit on their applications, not just a capped percentage. They can also explore other ways to stretch your income, such as using a specialist lender.
You can arrange a free, no-obligation chat with one of our brokers below to explore your options, or start comparing the latest mortgage deals yourself:
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How much you can borrow with this benefit included
Some lenders will cap the amount of child benefit that you can include in your mortgage affordability calculator, with 50-70% of the total being a standard limit. But there are plenty of mortgage providers who will accept 100% of it alongside a main source of income.
Most lenders will take your total declarable income and multiply it by 4.5 to work out your maximum borrowing, but others will stretch to 5 times earnings or higher.
Enter your total household income into our calculator below, including any child benefit you receive, to get a rough idea of the maximum you could borrow with the right lender.
Which mortgage lenders will accept child benefit income?
If you want to include child benefit income in the affordability assessment of your mortgage application, lenders including Aldermore and Metro Bank are ones to avoid, as they do not accept this type of income. There are many lenders who allow up to 100%, however.
Below you will find examples of the available lenders and some of their criteria:
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Santander: Will accept 100% of your child benefit income for your affordability assessment if your household income is £60,000 or less.
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Leeds Building Society: Accepts 100% of any child benefit income an applicant receives alongside a primary income source, but judges applications on a case-by-case basis if the child benefit will cease before the mortgage term ends.
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Accord Mortgages: Will accept 100% of your child benefit income for your affordability assessment if your household income is £50,000 or less.
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Halifax: Will accept this type of income with no specific caveats providing the applicant has proof of their child benefit income, such as an awards letter.
For a full list of the available lenders, speak to one of our mortgage brokers.
Get started on your mortgage journey
At Teito, we're a whole-of-market mortgage broker which means we have access to hundreds of lenders, including those that accept child benefit payments as part of their affordability calculations. Get started here to compare the latest mortgage rates available and talk to one of our brokers about the options for borrowers with child benefit income.
FAQs
There are mortgage lenders who will let you include the following benefits in your affordability assessment, on top of child benefits:
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Universal credit
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Disability benefits
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Personal tax credits
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Pension credits
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Carers allowance
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Disability living allowance
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And more
As with child benefit, some lenders will only let you declare a capped percentage of the above and most will expect you to have a primary income source as well.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.