Mortgages and Furlough
Are you currently relying on furlough income?
On the 20th March 2020 a government scheme called the Coronavirus Job Retention Scheme (CJRS), better known as Furlough, was introduced. Since that time many people within the UK have been furloughed by their employer and some have continuously been on the scheme. Under the scheme you receive 80% of your salary for hours not worked.
If you are currently on furlough and considering applying for a mortgage it can understandably be a worrying time. Certain factors will affect your mortgage application and the options open to you may be more limited. However, there are certain things you can do to help!
Is it possible to get a mortgage if you’re still furloughed?
It will undoubtedly be more difficult for you to get a mortgage if you have been continuously furloughed since the start of the scheme. Mortgage lenders will consider your future income uncertain so it is often advisable to wait to make your mortgage application until you’ve returned to work for several months. Every situation is different though and would be reviewed by the lender on a case by case basis.
Can you get a mortgage if you had an Agreement in Principle before you were furloughed?
This is a tricky one as although you already have a mortgage Agreement in Principle this was agreed before you were furloughed. Your employment situation has since changed (most notably your income being only 80% of the income your mortgage Agreement in Principle was based), and this will have an affect. All is not lost though - if you have been on furlough and now have a confirmed return to work date with your employer your mortgage provider may still agree to lend to you. Unfortunately, if this is not the case it is more than likely your mortgage will be refused despite the Agreement in Principle
I have a return to work date - can I get a mortgage now?
Possibly! For those on furlough that have a confirmed return to work date you might be able to find a lender. It's worth remembering however that lenders will decide how much you can borrow based on your current income. This means that if you are only receiving 80% of your usual income, what you can borrow now will be less! It may therefore be better to wait until your income is back to 100%.
Can I switch mortgages if I'm currently furloughed?
Switching mortgages can be more difficult when you are furloughed for the same reasons listed above. You may however be able to switch to another mortgage product provided by your current lender. For instance, if you have a fixed-rate mortgage and the introductory period has ended, you may be able to switch to a different fixed rate mortgage offered by the same lender.
I've returned to work after furlough - can I get a mortgage?
Whilst lenders may be more cautious the answer broadly is yes! Once you are back in work there will be far more mortgage options available to you. There are certain things you can do to help this process like providing documentation from your employer that confirms your employment status is stable. It can also be helpful to wait for three months after returning to work so that you can provide three months of payslips as evidence.
Is it possible to switch mortgages after you return from furlough?
Yes! The good news is Transparent Mortgage Services can help you find a range of deals that will now be available to you. Like above, it may be advisable to wait for three months to get the right deal as you will have the necessary documentation like payslips and bank statements to confirm your level of income. Mortgage providers may undertake more checks than usual so just bear in mind that the administrative process of switching providers may take slightly longer.
For more advice on the effects of the furlough scheme when applying for a mortgage speak to one of our helpful mortgage advisors! As an independent mortgage broker we are not tied to any particular mortgage lender so we will find the best deal for YOU!