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Mortgage During Or After a Furlough

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

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 3rd April 2020 *

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 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.

In this guide, we’ll explain exactly how furlough leave can affect your chances of getting a mortgage and outline the kind of support that’s available to you.

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Can I get a mortgage after a furlough?

Yes. If you’ve returned to work after furlough leave there’s no reason why you shouldn’t be able to get a mortgage, 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 may be more than happy to offer you a post-furlough mortgage 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.

When might a furlough cause issues for a mortgage applicant?

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.

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

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 can 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.

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 specialist 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.

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 still on furlough leave and want to remortgage, 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 a mortgage 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.

However, certain lenders including Natwest and Nationwide, are only considering applications based on the customer’s furlough income, rather than their full-time salary. Furthermore, some mortgage lenders aren’t accepting bonus, commission or overtime income from borrowers who are on the government’s job retention scheme.

At the time of writing, though, some lenders are treating furloughed applicants similarly to customers who are on maternity leave and offering them mortgages based on their full-time salary - make an enquiry to speak to a broker and find out which lenders are doing this.

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.

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.

Speak to an expert

Given that coronavirus furlough is something mortgage lenders have never had to deal with before, the industry’s stance on customers in these circumstances is still being determined. Some lenders have confirmed that they are happy to consider borrowers who are on furlough or recently out of one, but this may not be the case across the board.

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.

Updated: 3rd April 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of 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 info 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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