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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: 27th November 2019 *

If you’ve been made redundant during a mortgage application or after you’ve completed one, there are steps you can immediately take to put yourself in a better situation. 

We’ve put together this guide which covers the key information you need to know about mortgage applications and redundancy:

We strongly recommend that you speak with a mortgage broker, ideally as soon as possible. The experts we work with are some of the best in the business, and they can discuss your situation with you and advise on the next steps to take. 

Call us on 0808 189 2301 or make an enquiry here and we’ll match you with an expert shortly.  

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Mortgage and redundancy: the basics

It can be difficult to know where to start if you’ve recently been made redundant. While you may have many financial commitments to take care of, if you’re currently applying for a mortgage or already have one, it’s best to act quickly and get a good understanding of your financial options. Lenders appreciate fast-acting borrowers, as it shows that you’re proactive and responsible, and may even be more flexible with you.  

The reality is that mortgage lenders can withdraw an application at any stage of the process up until the mortgage has been completed, should they feel that your circumstances will affect your ability to pay off the loan. While mortgage applications can be a lengthy and involved process, risk will always be a priority for lenders, so a loss for them in the short-term is outweighed by any possible future shortcomings. 

The rules are a little different if you’ve been made redundant after you’ve accepted a mortgage offer. While you’re not obliged to tell your mortgage lender, if you can’t afford to pay back the loan and miss your payments, you could lose your home in a worst-case scenario. 

However, with the right advice you can take appropriate action, and the experts we work with are experienced in mortgages and redundancy. Make an enquiry here to get started.  

Should I apply for a mortgage if I’m 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 about your employment and whether you are at risk of redundancy (which will go on record). They also require 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.

If you know you may be getting made redundant and lie on your application to boost your chances of getting a better mortgage, you could face serious consequences, including fraud.

It’s always best to seek guidance in these circumstances, and the expert mortgage brokers we work with can provide free, tailored advice so you can plan for your future. Make an enquiry to get started. 

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

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 (such as 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.

Before informing your mortgage lender, you may find it helpful to speak with a mortgage expert first as they can advise you on how to negotiate with your lender, and what to do if they cancel your mortgage application. Make an enquiry for the best advice about your mortgage and redundancy. 

What should I do if I was made redundant after I got my agreement in principle?

A mortgage in principle is a statement from a lender agreeing to loan you a certain amount before a purchase is finalised. Depending on your circumstances, lenders can change the details of your agreement or decline the loan altogether after the final mortgage application has been submitted. 

One of the most common reasons for a lender to withdraw an offer is changes in your 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. You don’t have to inform them at this stage, however, if they find out that you’ve been made redundant, they may withdraw your application as it’s not legally binding until the offer has been completed. A lender may decide to re-do your affordability assessment, which could affect your mortgage rate. 

It’s only once a mortgage offer has been completed that you are under no obligation to inform your lender that your situation has changed.

Most experts will advise you against purchasing a home if you’re uncertain about your financial future. 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, lenders also have the right to refuse to refund any upfront fees that have already been paid. 

If you aren’t sure of your financial future, it may be best to take a step back and reevaluate your circumstances. Make an enquiry and we’ll match you with an expert mortgage broker who can steer you in the right direction. 

We’ll find the perfect mortgage expert for you - for free

Save time and money with the right mortgage advice, first time

  • Network of over 200 brokers all with whole of market coverage
  • Save up to £400 per year with a mortgage expert matched to you
  • We've helped over 120,000 people get the right advice
  • Our quick & easy form only takes a couple of minutes to complete

Can I remortgage if I become 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 your circumstances, and whether you wish to remortgage before or after being made redundant. 

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 for more information and to see what deals you could qualify for. 

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 reliable with making payments 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, contact your lender to see if you can come to an agreement. 

We’ll find the perfect mortgage expert for you - for free

Save time and money with the right mortgage advice, first time

  • Network of over 200 brokers all with whole of market coverage
  • Save up to £400 per year with a mortgage expert matched to you
  • We've helped over 120,000 people get the right advice
  • Our quick & easy form only takes a couple of minutes to complete

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 0808 189 2301 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 to make a purchase. Your credit rating will also not be affected. 

Updated: 27th November 2019
OnlineMortgageAdvisor 2020 ©

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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