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Redundancy During and After Mortgage Applications

The key information you need to know about redundancy, risk of redundancy and mortgage applications.

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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: 11th July 2019* | Published: 9th July 2019

We often receive enquiries from customers who have been made redundant while applying for a mortgage, or are worried that they are at risk of redundancy during a mortgage application.

If this rings true for you, we strongly recommend you speak to a specialist who can discuss your situation with you, and advise you on the best steps to take moving forward. 

In the meantime, this guide will be covering the key information you need to know about mortgage applications and redundancy:

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Should I apply for a mortgage if at risk of redundancy?

Generally speaking, most experts would not advise applying for a mortgage if you know you are going to experience financial difficulty or uncertainty.

When you apply for a mortgage, providers will ask for details on your employment and evidence of your monthly income and outgoings. This is to determine your affordability before they decide if they want to loan you money, and at what rate.

What should I do if I’m at risk of being made redundant during the mortgage application?

If you know you’re at risk of being made redundant during the mortgage application process and will be relying on your job to make the repayments, your affordability is affected and you might find yourself struggling later on.

On the other hand, if you’re in a good financial position (e.g. have a secondary form of income or savings which can be used to repay the loan), it may still be viable - provided you declare your proposed repayment method to prospective lenders.

Make an enquiry to get expert advice on the best course of action.

What should I do if I’ve got a mortgage in principle then been made redundant?

A mortgage in principle is a statement from a lender agreeing to loan you a certain amount before a purchase is finalised. Lenders can change the details of your agreement or decline the loan when the final mortgage application is submitted. 

A common reason they are declined is due to changes in financial circumstances, such as redundancy. If your lender has reason to believe that your affordability has been compromised as a result, they may reject your application.

All lenders work to different affordability criteria, so even if your mortgage in principal is declined by one provider, there may be others out there who are willing to lend if you have other means of repaying. 

Speak to a whole-of-market broker to be in with the best chance of securing a mortgage offer after redundancy at the most competitive rates.

What do I do if I’ve been made redundant after a mortgage offer?

If you’re made redundant after a mortgage offer has been made, it could have a huge impact on your financial situation if you decide to accept. 

If you’re confident that you will be able to keep up with the repayments, you may still decide to take the offer, and you are not under obligation to inform your lender that your situation has changed.

However, you are also within your rights to turn down a mortgage offer because it is not legally binding until it’s signed. If you’re uncertain about your financial future as a result of redundancy, most experts will tell you it’s probably not the best time to purchase a home.

Bear in mind that there may still be some associated fees, as some lenders impose upfront charges. So while you can reject a mortgage offer, providers also have the right to refuse to refund any upfront fees that have already been paid.

Can I remortgage when redundant?

If you’re already tied into a mortgage and redundancy is on the cards, one of the ways you might look to mitigate that is to remortgage your home. Whether or not your application is approved will depend on the situation:

Remortgaging before redundancy

If you’ve already taken out a mortgage and know in advance that redundancy is on the horizon, you may be able to prevent future financial difficulty and reduce your monthly payments by remortgaging your home

Speaking to a whole-of-market broker will help you secure the best deals on your remortgage before redundancy. As you’ll hold more equity in the property than you did in your initial application, this should be reflected in your new quotes.

If you’re at risk of redundancy, it may be an ideal time to remortgage and secure yourself a cheaper rate. Your application is more likely to be accepted if you remortgage before rather than after redundancy.

It’s important to note that remortgaging is not for everyone; there are associated fees, and in some cases it may cost you more - speak to an expert if you’re unsure.

Remortgaging after redundancy

If your salary plays a key role in covering your payments, many providers are unlikely to authorise a remortgage after redundancy. However, if you have a joint mortgage and your partner’s income proves sufficient, some lenders may accept.

The best advice if you find yourself in this situation is to speak to your mortgage provider as early as possible. If you have any doubts about whether you’ll struggle to continue repaying your loan, the chances are they will try to help you.

Some may offer you a “mortgage holiday” if you have a good history of meeting your payments. Others may agree to reduce your commitment to interest-only repayments, extend the mortgage term, or move you on to a cheaper deal.

Each provider will have different approaches and eligibility criteria, but many are happy to help you if you’ve been a reliable customer so far. After all, repossessions cost lenders money, so it’s in their best interests to assist you in times of need.

How does voluntary redundancy affect my mortgage?

Voluntary redundancy is when an employer asks an employee to consent to a contract termination in return for a financial incentive. Voluntary redundancy typically offers more in the way of financial compensation than compulsory redundancy.

Similar to the above, if you know in advance that you’re up for voluntary redundancy, you could look into remortgaging or downsizing your property before it comes into effect if the payout isn’t sufficient to cover your current repayments.

If you’ve already accepted voluntary redundancy and think that you’ll have a problem paying off the loan, it is advised that you contact your lender straight away to see if you can come to an agreement.

Speak to an expert for advice on redundancies and your mortgage

If you’ve been made redundant during a mortgage application, or feel that you are at risk of redundancy and want to know how it will impact your home loan, speak to an advisor as soon as possible.

The whole-of-market brokers we work with are experts in the field, and can give you bespoke advice on the best course of action for your unique circumstances.

Give us a call on 0800 304 7880 or make an enquiry, and we’ll refer you to a specialist. We don’t charge a fee, and there is absolutely no obligation on your part.

Updated: 11th July 2019
OnlineMortgageAdvisor 2019 ©

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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