With recent news revealing that the housing market will begin to reopen, along with house viewings with appropriate social distancing, it appears that the UK housing market is on the mend. This raises the question for many who have been furloughed due to the coronavirus outbreak, how will this affect their chances of getting a mortgage?
Being furloughed does not mean the end of your mortgage application
If you have been furloughed and are currently on the government Job Retention Scheme, you may understandably be slightly worried about how this may affect your mortgage application.
Furlough has left millions of British workers with a 20% pay drop as the government’s coronavirus Jobs Retention Scheme aims to keep workers employed and paid even if they are out of work during the pandemic. Nearly 27 percent of the British workforce has been furloughed, according to the Office for National Statistics.
During the last week, most major lenders have now confirmed their positions with clients and the majority stand to accept future mortgage applications, for both purchases and mortgages for people who have been furloughed.
Whilst some lenders will be looking to use 80% of the normal income for their affordability assessments of the new mortgage, in line with the income you will receive from the Job Retention Scheme, others have confirmed that where the employer is topping up your income to 100% of your normal salary then the full salary will be taken into account for your mortgage application.
Some lenders have been seen to be capping loans to values for clients working on a furlough basis to the proportion of the property on which they are lending. This means you would need a larger deposit, up to as much as 40%, with some lenders.
Can I apply for a mortgage if I have been furloughed, and should I?
Whether or not you can apply for a mortgage depends on the lender. Lenders will look for customers who have a solid source of income, although being furloughed means you are still employed and have money coming in, the acceptance of your mortgage will depend on the lender.
Whilst some lenders are not offering deals to those who have been furloughed or who have applied to the self-employed income support scheme, other providers may be willing to accept applications.
For anyone wanting advice about their own specific circumstances, the only way to find out is by contacting any potential mortgage lender, or speak to one of our advisors and we can talk through your options.