Due to the coronavirus pandemic, many found themselves on government furlough implemented by their employers, affecting wider finances including loans and mortgages. However, it is still possible to receive mortgage approval whilst on furlough.
Can I Get Approved for a Mortgage if I’m on Furlough?
If you are currently on furlough during your mortgage application, it may still be possible to get approved for a mortgage but you will need to demonstrate to the lender that you will be returning to work and that your job will be secure in the future.
Being on furlough is still technically classed as remaining in employment so it should not impact the choice of mortgage deals available to you.
In order to prove this, the majority of mortgage lenders are requesting employment references from furloughed borrowers and want to see a payslip when you return to work at the earliest opportunity to protect themselves against “furlough fraud”.
Which Mortgage Providers Can Approve Mortgages for Those on Furlough?
There are many well-known mortgage lenders that are considering applications for individuals on furlough including Post Office Money, Metro Bank and Santander. In addition, there are even specialist mortgage providers who aim to offer deals especially for those in these circumstances.
In general, mortgage approval will be done on a case-by-case basis and there will also be variation between lenders. For example, the majority will request a letter from an employer and some will have stricter lending criteria than normal.
Working with a mortgage advisor could help match you to the lender most suited to your personal circumstances. Mortgage advisors can find you the best deal possible and the most favourable terms. They also allow you access to a broader range of deals rather than working with one specific bank or building society who are limited to their own products.
Am I Able To Get a Mortgage After a Furlough?
You can still get a mortgage if you are furloughed and if you have returned to work after furlough, there is no reason why you should not be eligible to apply for a mortgage.
As with any mortgage, you will need to meet the lender’s eligibility criteria and present any required documentation. If you have only recently returned from furlough leave, it is possible that some mortgage providers may be more cautious with your application and may view your application as risky, particularly if you are working in a sector that is under ongoing threat and is subsequently more “high-risk”.
How Will Furlough Affect My Mortgage Application?
If you are currently still on furlough leave, it may reduce the pool of mortgage lenders who are available to you, particularly if you are unsure about future employment. Those who have only recently returned to work or who are working for companies or in sectors that are deemed less stable, may have more difficulty securing a mortgage.
However, the majority of lenders will still consider your mortgage application whilst you are on furlough, taking into account your full income and any potential subsidiaries from your employer.
What Happens if I Cannot Pay My Mortgage While on Furlough?
In order to support those who have been furloughed struggling to meet their mortgage payments, the government implemented various measures. Since March 2020, there have been initiatives available to help homeowners who are struggling to pay their mortgage following the impact of the coronavirus pandemic.
The Financial Conduct Authority (FCA) has implored lenders not to repossess properties whilst these measures are in place and in general mortgage lenders are being advised to be more lenient with their customers on furlough if they are in times of financial difficulty.
Another measure that the government introduced was optional mortgage payment holidays for customers. This means that borrowers can make an agreement with their lenders that they will not need to make a mortgage payment for a three-month period (extended to six additional months after October 2020). However, experts suggest that this should only be as a last resort given that interest will continue to accrue.
Some lenders are offering customers the chance to switch to an interest-only agreement meaning that they will only need to pay monthly instalments which cover the interest rather than paying off the capital.
