How Does the Ending of Furlough Impact Your Mortgage Application?
As a result of the pandemic, the past year or so has been marked by social, financial and business strife for many of us. Whilst it has been a tough year financially for millions of families and individuals throughout the UK, mortgage applications and the wider property market has remained remarkably buoyant.
In this article, we will discuss what being furloughed means potentially for your mortgage application and what the possible ending of the furlough scheme may mean for you and your planned move.
The Property Market in a Time of Global Pandemic
The furlough scheme was launched with the onset of the global crisis last year and indeed the UK Government was one of the first to offer a package of financial schemes aimed at supporting businesses and families.
The furlough scheme currently ensures that 80% of a monthly salary is covered each month and has a set cap of £2500 per month. The voluntary scheme has supported just short of ten million people since the start of the pandemic and has certainly buffered the unemployment figures by offering employers the much-needed support that they require.
Whilst many segments of the UK’s economy have been battered, the property market has remained open throughout and many have taken advantage of the current Stamp Duty holiday initiative by the government to complete their house purchase. With this being said, however, the past year has seen mortgage providers hit with a spike of some 700,000 defaults on mortgage payments. So whilst the sector may have a good cause for optimism, the future is still uncertain for many.
Can You Get a Mortgage If You Are Furloughed?
The short answer is that yes, you may still be able to potentially apply and be awarded a mortgage if you are under the furlough scheme.
The main factor that banks and lenders will look for is your ability to demonstrate a stable and regular income and whilst some providers will not consider furlough a stable enough guarantee of income, others may – it ultimately depends upon your circumstances. You may find that you have a reduced number of options to choose from and will have to be more flexible in your mortgage provider search, to secure your desired property.
A key consideration is the longevity and stability of your employer to come out of the furlough scheme relatively unscathed and able to ensure that your employment looks set to continue for a prolonged period.
In short, you may well be eligible for a mortgage product but the options may be limited – if you are furloughed and your employment is secure, then it is likely that there will be a product for you! If you are applying as a couple and one partner is non-furloughed then the provider may also look more favourably upon your application.
Remortgaging Whilst Furloughed
The good news is that so long as you are not looking to borrow any more on top of the value of your existing mortgage, you may be able to re-mortgage whilst furloughed.
It may also be easier talking to your current mortgage provider as its often easier to discuss your requirements with someone with whom you have a relationship with instead of starting afresh!
Mortgages Are Available But Are More Difficult To Secure
Everything has changed in the past year or so and for many, the promise of a secure and long term job & easy to access and service mortgage is now more difficult than it was prior to the pandemic.
The furlough scheme has been a lifeline for so many but with the programme currently due to end in September of this year, there is genuine consternation about what the end of furlough will mean for those applying for mortgages at this time.
The good news is, that for all those looking to re-mortgage or have a second income, there are still avenues available to secure a mortgage however you may have to provide additional assurances of your income stability.
For those who are applying afresh or are a single applicant, the situation is a little trickier and you may need to go to non-mainstream providers to secure a mortgage and this may mean gathering as much supporting information as possible with regards the stability of your employment to give product providers additional surety on you ability to repay your mortgage.
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Please Note: All information, references and dates included in this article were accurate at the time of publishing.