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Getting a Mortgage While on Furlough

How to get a mortgage after being placed on furlough during the coronavirus crisis.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 27, 2022

During the coronavirus crisis, you may have been placed on furlough by your employer and are now wondering whether this will affect your chances of getting a mortgage in the future.

The good news is that mortgage approval on furlough is possible and there’s help available. We work with expert brokers who have helped people get the mortgage they need under all kinds of niche circumstances, and they’re well placed to offer expert advice to anyone who was placed on furlough leave whether it be for a sole or joint mortgage application.

Can I get a mortgage after a furlough?

Yes. You can still buy a house if you’re furloughed, get a mortgage or apply for related financial products like remortgages and bridging loans.

If you’ve returned to work after furlough leave there’s no reason why mortgage approval should be off the table, assuming you meet the lender’s general eligibility criteria. Being placed on furlough is technically classed as remaining in employment, so it’s unlikely to affect the deals available to you, assuming your job is likely to stay secure.

However, if you only recently returned from furlough leave, some lenders might view your application with caution. If there is any ongoing risk to the company you work for or your job is considered under threat, your choice of lender might be slimmer as there are mortgage providers who are approaching customers that work in ‘high risk’ sectors with caution.

Not everyone who has been placed on furlough will be classed as high risk from a lending perspective when they return to work, but if your employment situation is uncertain, keep in mind that some mortgage lenders have a higher appetite for risk than others and maybe more than happy to offer post-furlough mortgages on standard terms, i.e. with exactly the same rates as somebody who wasn’t placed on leave during the coronavirus outbreak.

Given that some providers are better placed than others to offer the best rates to customers after a furlough, your best bet is to apply for your mortgage through an expert broker who knows the market. They can match the level of risk your application carries to the mortgage provider with the right appetite for it to ensure you get the best deal that you qualify for.

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Will furlough affect my mortgage application?

If you’re still on furlough leave, you may find that your choice of approachable lenders is fewer, especially if there are question marks around whether your job will resume. And as previously mentioned, those who recently returned to work might find their employment situation under scrutiny as the lender will want to be sure that your job is secure.

The majority of lenders who will lend whilst you are on furlough leave will consider the full income you receive plus any top-ups from your employer. It’s important to remember, however, that most lenders will only consider basic salary and not additional elements such as overtime or commission.

Does being furloughed affect second home mortgage applications?

Only in exceptional circumstances. Issues could also arise if it’s a second home mortgage or a remortgage that you’re applying for and you missed payments on your existing mortgage or other credit payments while on furlough.

If you failed to inform your lender that the payments would be late, this could jeopardise future applications for finance. Make an enquiry to speak with a broker for more information.

How to get the best rates after furlough leave

If you’re buying a property on furlough and looking for the most favourable interest rates, your best bet is to avoid mortgage lenders who are likely to consider your application higher risk, and this is especially important if there’s any uncertainty around your employment.

If you apply through a broker, they will search the entire market for you and match you with the lender who is ideally placed to offer you the best deal for your needs and circumstances.

Moreover, saving up extra deposit will lower the overall risk the deal carries by bringing down the LTV, plus having more deposit to put down means access to a wider range of lenders and products with lower rates.

Your employment situation, of course, isn’t the only factor that will determine what kind of rates you end up with. If you have bad credit, a bad credit mortgage lender might be required to approve your application on standard terms, and depending on the age and severity of the issue, a higher deposit amount might be needed purely to qualify for a mortgage.

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Liverpool, UK
I was set to move into my new home and everything was going smoothly. But then I was furloughed during COVID and had to take a pay cut. The bank did final checks after I had exchanged contracts and decided I was too much of a risk on my current salary. Luckily Online Mortgage Advisor found me another lender straight away, one that was happy to lend the same amount on my furlough wage.
Derby, UK
I was offered an agreement in principle by a high street bank who said they’d be happy to give me a mortgage for £250,000, but just before completion they went back on this because I had to take a small pay cut during the covid pandemic. I went through a tough time and my mortgage application falling apart was the last thing I needed. Thank goodness for Online Mortgage Advisor!

Can I remortgage after a furlough?

Yes. There’s no reason why not, and as long as the lender is confident your job is secure, it may be possible to lock down a more favourable interest rate than before.

If you’re applying for a remortgage on furlough, some lenders may consider offering you a deal based on your pre-furlough wages, although they might ask to see some evidence that you will be returning to work on full salary in the future, such as a letter from your employer. This is likely to be determined on a case-by-case basis.

Other lenders may only consider offering you a remortgage based on your furlough income, typically 80% of your normal salary, unless your employer is topping it up.

The only reason you might struggle to remortgage after a furlough is if you missed mortgage payments while on leave from work without agreeing a payment holiday with your lender.

You can read more about refinancing mortgages in our in-depth guide to remortgaging.

Can I get a mortgage if I’m still on furlough leave?

As long as the lender is confident that you will be returning to work and your job will be secure in the aftermath, then it may be possible to get a mortgage while on furlough.

Most mortgage lenders are asking furloughed borrowers for employment references and will be keen to see your first payslip when you’re back at work to safeguard themselves against “furlough fraud”.

Whatever your circumstances, make an enquiry to speak to a broker who knows exactly which mortgage lenders to match furloughed customers with.

Which mortgage lenders are accepting applications from furloughed customers?

Mortgage lenders considering applications from people currently on furlough include Santander, Metro Bank, Post Office Money and Scottish Building Society, in addition to a range of specialist mortgage providers and challenger banks.

Most of these lenders will assess furloughed applicants on a case-by-case basis and will want to see a letter from their employer confirming that they’ll be returning to work. Some might also request their first payslip post-return.

Some mortgage providers still have restrictions on their lending criteria for furloughed customers, so the importance of seeking specialist advice before you apply has never been higher. You’ll want to be matched with the lender who’s best positioned to offer you the most favourable deal possible in the current climate, and you’re unlikely to find that if you gamble by going direct to one bank or building society, thus only having access to their products.

A minority of lenders aren’t considering new applications from furloughed borrowers at all. Coventry Building Society, for instance, are only accepting applications for finance from existing customers and Bluestone is exercising caution with furloughed customers from the hospitality industry.

What support is available if I can’t pay my mortgage while on furlough?

In March 2020, the government announced measures to help homeowners who are struggling to pay their mortgage due to the impact of the coronavirus.

Mortgage lenders are being encouraged to be lenient to customers on furlough if they’re experiencing financial difficulty and the Financial Conduct Authority (FCA) has instructed lenders not to repossess properties while the measures are in place.

Moreover, the government announced optional mortgage payment holidays for customers as part of its package of support. This is an agreement you can make with your lender that means no mortgage payments are due for a three-month period. They were recently extended for up to six additional months beyond October 2020, following confirmation of the national lockdown that will run between 5th November and 2nd December.

Most experts only recommend taking a mortgage holiday as a last resort, though, since the interest will continue to accumulate during the break and you will end up owing more and be lumbered with higher monthly payments when the holiday comes to an end.

Mortgage holidays aren’t the only support being offered to coronavirus-impacted homeowners. Some lenders are giving customers the option to switch to an interest-only agreement and waiving fees for missed payments during the crisis.

If you’re struggling to pay your mortgage while on furlough, you should speak to your lender to find out what options are available and only consider a holiday if there are no alternatives. For independent advice, make an enquiry and we’ll match you with a broker.

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Speak to an expert

To find the mortgage lender who is best placed to offer you favourable rates during or after a furlough, your best bet is to speak to a whole-of-market broker. They will know exactly which lenders have the right risk appetite to handle your application and offer the best rates.

Call 0808 189 2301 or make an enquiry and we’ll match you with an expert broker for a free, no-obligation chat about your circumstances today.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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