An update on where you stand if you’re on furlough or if you’ve been furloughed in the past and want to apply for a mortgage.
Chancellor Rishi Sunak announced in the March budget this year that the Coronavirus Job Retention Scheme (also known as The Furlough Scheme), would be extended until the end of September 2021. Workers can continue to receive up to 80 per cent of their salary for hours they do not work, up to a maximum of £2500 per month.
Last June, we wrote about getting a mortgage when you’ve been furloughed. We said many lenders would still be prepared to lend, albeit on 80 per cent of your income (unless your employer is topping up the 20 per cent shortfall). We added that many lenders would accept written confirmation that you are going back to work.
Almost a year later, where do you stand when furloughed or if you’ve just returned to work after being furloughed? Are lenders still open to applications from applicants affected by the pandemic in this way?
Can you get a mortgage if you’ve been furloughed?
Some lenders may lend to you if you’ve been furloughed and are now back at work. A lender will want to see that your job situation is stable – you may need to provide written confirmation from your employer that your job is safe. It would be preferable if you could obtain three months’ worth of payslips before you apply for a mortgage.
‘If you’ve previously been furloughed, are back at work, and can evidence this, it’s safe to assume that there will be plenty of options for you,’ says MB Associates’ Sales Manager Phil Leivesley.
Some lenders will be more flexible than others and lenders will assess your application differently. This means it’s hugely important to get specialist advice from an experienced broker who will know who to approach on your behalf.
Can you get a mortgage if you’re still furloughed?
If you can prove that you have a specific date for returning to work, you may be fine. However, most lenders will view your application cautiously and you may be better off waiting until you are back at work. If you are applying for a mortgage now, you will only be able to borrow based on 80 per cent of your normal earnings. Make sure you have a date for your return to work. Unfortunately, if you don’t have a confirmed date for going back to work, you won’t be able to get a mortgage. ‘Those who remain furloughed with no confirmation of a return date are likely to find it impossible to get a mortgage right now,’ says Phil.
Can you get a remortgage if you’ve been furloughed in the past?
This may be possible but allow plenty of time for your application to be processed. Switching to a new lender won’t happen overnight. Allow at least three months to find a new lender.
What if you had a mortgage agreement in principle before you were furloughed?
If you had an AIP (agreement in principle) for your mortgage and were then furloughed, be aware that things have changed. Your lender agreed to your mortgage loan based on the amount you were earning before you were furloughed. Unless your employer is topping up your income, you will now be earning 80 per cent of your normal salary. Your lender may wish to carry out their affordability checks again and base them on what you are currently earning, i.e. less than before. You will also need to show that your job situation is secure.
We’re here to help if you have any questions about applying for a mortgage after being furloughed, or if you’re still on furlough. Feel free to contact us.