Furlough & Your Mortgage

How Does Furlough Affect My Mortgage?

As many have or are considering applying for the furlough scheme, which will see their income drop to at least 80% of their normal wage, it is understandable that many are concerned about how this will affect their mortgage.

This isn’t only a concern for those currently in the middle of a house move or remortgage, but those have been planning and saving to get on the property ladder. So how could this drop in income impact if you can borrow and/or the amount?

Firstly, mortgages aren’t only calculated on your income. Lenders will look at many factors that give them an overview of your financial health. This includes income, credit rating, existing debts/commitments, employment status etc. They then base whether an offer of a mortgage can be made and at what rate on all these factors. This process applies to anyone seeking a mortgage, whether they are buying their first property, moving home or remortgaging their current home.

So What About During Furlough / COVID-19?

Under the current financial situation it is most likely that if you are only receiving 80% of your normal salary, this will effect how much you can borrow – affordability will always be calculated based on your income at the time of application. This will not only impact those buying a new property but also the amount of borrowing for a remortgage. And for first time buyers many lenders may now require a larger deposit to be paid.

While bonuses and commissions have traditionally been taken into consideration while calculating mortgage amounts, many lenders have suspended acceptance of applications based on this income due to the current crisis.

Can I Still Apply For A Mortgage?

You can absolutely still apply for a mortgage during your period of furlough, just do so with the awareness that the amount you may be able to borrow will likely be impacted. This may mean you have to consider a different property than you originally planned to purchase.

What If I Was In The Middle Of A Mortgage Prior To Furlough?

If you were already in the process of securing a mortgage, lenders have announced that they will be extending mortgage offers by up to 3 months. It is essential however that you contact them asap if your financial situation has changed since your application.

What Does All This Mean?

In this time of uncertainty, it is more apparent than ever that everyone’s circumstances are a little different, no one size fits all answer exists.  The best thing to do is to seek advice from professionals on your individual situation. Then you can make an informed decision about whether applying for a mortgage at this time is right for you.

As always, we hope this helps! For more information on how ABC Mortgages can help you with your mortgage needs you can contact us through the information below.

Thanks,
Bill Muir
ABC Mortgages

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