With the announcement that the furlough scheme has been extended until September 2021 and with the planned re-opening of businesses, you might be wondering what your mortgage application opportunities will be if you’ve been placed on furlough.
The furlough scheme has been running for the past year now helping to pay around 11.2m employees their wage. Whilst the government has provided 80% (capped at £2,500) of employees wages it has been optional for your employer to top up your earnings to your full-time salary. Where employers have been unable to top up earnings it means some employees have received a cut in their monthly income.
So, has that cut in wage affected your chances of getting a mortgage in the future?
Can I get a mortgage if I’ve been on furlough?
The short answer is yes. However, as we’ve said, often being placed on furlough has meant that your salary or wage has been reduced. As a result, it means that applying for a mortgage isn’t straightforward and needs careful consideration.
This doesn’t mean lenders won’t consider a mortgage application from you if you’ve been furloughed. You can still buy, get a loan or apply for many other financial products.
With regards to whether being on furlough will affect your mortgage, being on furlough means that you are still technically employed and assumes your job is likely to stay secure. However, if, for instance, you don’t have a date to return to work it can be seen as a risk to lenders. Even if you have recently returned to work you will likely be subject to scrutiny to ensure your job is secure.
What’s the difference?
The lending pool may be narrowed if there are question marks over the return dates of your job. Therefore, the lender you originally had in mind may not be the one you apply with now.
Although most lenders will assess applications on a case by case basis, some lenders have placed restrictions on lending to furloughed customers or are simply not accepting applications. It may also mean that you are offered less than you expected due to the change in income whilst you were furloughed.
Finding a lender to suit your circumstances if you have been on furlough is paramount to the success of your application, which is why it’s important you receive the right advice and guidance.
Your mortgage application after furlough
If you’ve returned to work following furlough, applying for a mortgage isn’t off the table even if your income was affected and has now returned to normal.
Lenders are concerned about two things, whether your job is secure and whether you will be able to afford repayments. Returning to work helps to remove some of that risk. However, if you’ve only just returned to work you may still be viewed with caution especially if there are still any risks to your employer or your job is under threat.
Every lender assesses applications to their criteria. This means some lenders may be more flexible than others when it comes to assessing an application from someone who has been on furlough. They may even offer the same standard terms and rates as someone who wasn’t placed on furlough.
Bear in mind though that not only will you need to consider your employment status and furlough, you will also need to ensure you can meet the lenders own criteria for mortgage applications like credit ratings and affordability.
Can I apply for a mortgage if I’m still on furlough?
The most important thing a lender will need to ensure is that you will be returning to full-time employment and that your job is secure. As long as you can provide this then it may be possible to get a mortgage while on furlough. However, if you’re still on furlough and don’t yet have a date to return, a mortgage application can be a little more complicated.
Although lenders will assess applications on a case by case basis they will want to see proof that you will be returning to work and that your employment is secure. A letter from your employer confirming you will return, proof that your salary is more than your furloughed income (if your income hasn’t been topped up) and possibly sight of your first payslip upon returning to work will likely be required.
If you are planning to apply for a mortgage whilst still on furlough the lending pool can be narrow and have a few more restrictions. They may also only consider your furlough income.
However, if you’re still on furlough, your income has been affected and you don’t know when you’re likely to return to work, in some circumstances it may be worthwhile to wait. Applications have been declined specifically because of furlough.
Can I remortgage after furlough?
As with applying for a mortgage after furlough, there is no reason why you shouldn’t be able to apply for a remortgage so long as your job and income are secure.
The only reason you may struggle to remortgage is if you missed any mortgage payments without agreeing to a payment holiday.
You’re not alone in your concerns over mortgage applications after furlough. Lenders have and are receiving numerous applications from those who have been on furlough and are generally fully aware that it was a temporary situation.
Nevertheless, some lenders are best placed than others to offer you a mortgage under these circumstances and it’s important that you are matched to the right one. Seeking specialist advice and guidance from an expert mortgage advisor who is fully aware of what’s going on within the market and who has access to whole of market can mean the difference in being approved.