Being placed on the Coronavirus Job Retention Scheme may have knocked many people’s confidence, and now potential buyers fear that lenders won’t accept them if they’re on furlough or have been furloughed in the last year.
The good news is that with the right advice, getting a mortgage in 2021, even if you’ve been furloughed, may still be possible.
What is the furlough scheme and when does it end?
Chancellor Rishi Sunak announced in March 2020 that the Government would pay 80% of furloughed workers’ wages, this is up to £2,500 a month. The furlough scheme was intended to help employers who were facing difficulties avoid redundancies and keep staff on the payroll.
Almost eight and a half million workers have been enrolled onto the scheme since it was first introduced, with claims totalling more than £8 billion. The scheme was initially due to run until the 1st June 2021, but has now been extended until at least the end of September 2021.
Can you get a mortgage if you’ve been on furlough in 2021?
So, the biggest question many of you will want to know is if you can get a mortgage if you’ve been on furlough. Lenders look at many factors to determine whether they will approve a mortgage and one of those important factors is stability of income.
If you’re due to return to work soon and have written confirmation or have recently gone back to work due to the ease of lockdown restrictions, some lenders may be happy to loan to you.
A big focus for your mortgage lenders will be your affordability for the amount of mortgage you’ve applied for. So, if your circumstances suggest that you’re able to make your repayments on time and in full, you are more likely to be approved a mortgage.
Mortgage lenders will look at your income vs your outgoings, including regular household bills and any debt repayments such as loans and credit cards, to ensure you have enough left over to cover the monthly mortgage repayments.
Key factors that affect your eligibility
The number of deals available to you will rely on several factors that affect your furlough mortgage eligibility. This includes:
- Age
- The amount of money you’re applying to borrow
- The type of property you’re buying
- Size of your deposit
- Credit history
- Your income-to-debt ratio
- The predictability of your income
If you’re looking at this list and worrying because you have an issue with one or more of these factors, it is important to know that our brokers help people every day with lots of different circumstances, even those who may have a bad credit score.
Can you get a mortgage if you’re still on furlough?
You can still successfully gain approval for a mortgage even if you’re on furlough. However, it is important to be aware that most lenders will view the application with caution.
If there is a risk of the borrower (you) losing their employment or reducing their income, that presents a risk to the lender as you may not be able to afford the loan you’ve applied for.
Essentially, it’s all about your affordability. So, our advice is to avoid applying for credit in the run-up to applying for a mortgage, especially with multiple lenders within a short space of time. Lenders can see your credit applications, successful and unsuccessful, and may use this information to make decisions about whether you meet their affordability criteria.
Can you get a remortgage if you’ve been furloughed?
Mortgage interest rates are currently very low so remortgaging in 2021 could be a great way to cut your monthly repayments, either by switching with your current lender or finding a new one.
If you want to remortgage, it’s best not to leave it too close to the end date of your current fixed-rate or mortgage agreement. We recommend at a minimum; three or four months should provide enough time to find and compare your options and then have the remortgage processed in time.
Should you wait until you’re back in full-time employment before applying for a mortgage?
If your income has been reduced due to furlough, waiting until it has resumed could improve your affordability where lenders are concerned. This will help you in the amount you can borrow and potentially be able to buy a better or bigger property.
Interest rates are currently low for mortgages so there is something to be said about locking in a competitive rate. However, ultimately, weighing up the pros and cons of the options that might be available to you could help you to make your decision.
A mortgage broker can calculate how much you can borrow with different lenders, under different scenarios. They’ll also look at the terms and conditions of mortgage contracts closely while looking at factors such as incentives and fees. This is all to present you with a selection of lenders either to approach now, or to bear in mind for the future when your circumstances change. https://www.themortgagehut.co.uk/expert-articles/bad-credit-mortgages/119/ive-been-furloughed-can-i-get-a-mortgage
