According to the latest UK Government HMRC coronavirus (COVID-19) statistics, the number of furloughed employees stood at 9.9m people as at 13th December 2020. Officially the Coronavirus Job Retention Scheme, the introduction and extension of the scheme has been a lifeline to struggling businesses and employees across the UK.

With the Government continuing to stimulate the housing market through the introduction of the Stamp Duty Land Tax holiday and extension of the current Help to Buy scheme, you may be wondering whether you can get a mortgage while on furlough or immediately after you return. We look at how different lenders are looking at furlough leave and what that means for first time buyers, homemovers and those looking to remortgage.

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Can I get a mortgage if I'm on furlough leave?

Lenders are continuing to look at each application on a case-by-case basis. The good news is that lenders are fully aware of the Coronavirus Job Retention Scheme however individual circumstances may vary. Applicants will be either:

  • Receive 80% of their usual salary, capped at £2,500
  • Receive their full salary with employers topping up the shortfall.

The majority of lenders will want to confirm that you are returning to an employed position and can afford the monthly mortgage repayments. There are however, some lenders that will lend to applicants without an employment reference or letter confirming a return to work date. An experienced whole of market mortgage broker will prove invaluable in such circumstances.

Should I wait until after furlough leave to apply for a mortgage?

In some cases, it might be worth waiting until you have a return to work date or have returned to work permanently. Some lenders will look upon this more favourably and will broaden the number of mortgage lenders and deals available to you. It will also give you peace of mind that you have adequate provision to meet your monthly mortgage repayments.

What if my mortgage was approved before I was placed on furlough leave?

If your mortgage lender approved your mortgage in principle prior to being placed on furlough leave, you will need to make your lender aware of your change in circumstances. Depending on whether a return to work date has been agreed, it may mean having to defer your mortgage application entirely until you have certainty that you will be returning to an employed position.

If you're using a mortgage broker, they will be able to advise whether that lender is the most appropriate and depending on your circumstances, may look to place the application elsewhere.

It's important that you're honest with your lender since they are likely to request payslips, bank statements and possibly an employer's reference once the full application is submitted.

What help is available from mortgage lenders if I'm furloughed?

Mortgage lenders, along with other financial institutions are offering support to borrowers that have suffered financial difficulty as a result of the coronavirus pandemic.

Borrowers can request a repayment holiday for up to six months but the deadline for doing so is 31st March 2021. If after the six month holiday you're unable to resume your monthly mortgage repayments, your lender may look at tailored options but this will vary by lender.

Once repayments resume, your lender will increase the monthly repayments slightly for the remainder of the term or extend the term of your mortgage.

Will my credit file be impacted by a mortgage repayment holiday?

The missed payments will not show as an adverse marker on your credit file but it is worth noting that lenders and other financial institutions may be able determine whether a repayment holiday was taken. This may impact your ability to secure credit in the future.

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