The property market is moving. House prices are rising. People are applying for mortgages in droves. And yet millions of people are still furloughed.
Does this latest surge in the property market mean that lenders are more relaxed about furloughed salaries? Well – not really. While it’s possible to get a mortgage while on furlough, it’s still very difficult.
If you’re trying to buy a house with a furloughed salary, don’t despair. Here, we’ll explain what’s going on, and how you can help your chances of getting that mortgage.
Furlough and mortgage lending
The Coronavirus Job Retention Scheme – or ‘furlough’ – is helping to keep employees going while work is paused. It provides employers with up to 80% of employee salaries, capped at £2,500 pcm per person.
Around 11 million UK jobs have been furloughed during the pandemic. The number of people on furlough at any one time has waxed and waned as the country dipped in and out of lockdowns – and with every fluctuation, lender confidence has decreased.
At the start of the pandemic, Town & Country Mortgage Services reported that 60% of lenders would consider furloughed income where it could be evidenced. However, as the pandemic progressed and things grew more uncertain, lenders became warier. At this point, they are much less willing to take risks than they were in early 2020 – and furloughed income is, from a lender point of view, a risk.
As a general rule, to get a mortgage while on furlough you will at the very least need a payslip with proof of your full salary. Some lenders may require a lot more than that – and many won’t even entertain the idea of giving a mortgage to a furloughed person, even with all the assurances you can give them.
This all sounds pretty depressing – but furlough need not be the end of your property ownership dreams. Here’s some advice for getting a mortgage while on furlough:
Get a joint mortgage
As a general rule, lenders will give more towards a joint mortgage than they will towards a solo mortgage. In the case of furloughed folk, they are more likely to look favourably on two people than on one.
This is especially true if only one of the couple is furloughed. If your partner is still working, you are in with a good chance of being granted a mortgage. If you have a partner or housemate, talk to them about the possibility of a joint mortgage.
Remember, a mortgage is a big commitment, so it’s not something to embark on lightly together. Talk it over thoroughly before making a decision.
Get a mortgage with restrictions
Santander, Barclays, and Bank of Ireland are considering mortgages for furloughed people – with restrictions. To get a mortgage from these lenders, you may need to accept certain conditions. For example, you may need to give a larger deposit, or you may not be able to borrow as much as you anticipated. Repayment terms may also be stricter than you were hoping.
It’s not perfect but, if you really can’t wait, a mortgage with restrictions is better than no mortgage at all.
Stay in close contact with your mortgage advisors
Things are changing fast, and lenders alter their mortgage conditions extremely quickly. Keeping in close contact with your mortgage advisors could help you to leap in at the right moment.
Check-in regularly, and ask them to alert you immediately if there’s a window of opportunity for you.
Take the opportunity to save (if you can)
Saving isn’t easy, we know. Especially in times like this. However, if you are lucky enough to be able to set money aside, it could benefit you in the long run.
Being furloughed may give you time to build up a larger deposit. A larger deposit will mean a more favourable mortgage when you do come to make your application.
Hang in there!
The sum of all of this is basically to hang in there. As you’re probably more than aware, things are complicated right now. The world changes by the hour – and that kind of unpredictability makes lenders wary. Furlough is a bit of an unknown quantity, and lenders often don’t want to take the risk of giving mortgages to people on furlough.
If you can wait until things settle down, you’re more likely to get the mortgage you want. Just grit your teeth, and wait it out.
If things are urgent and you desperately need a mortgage while on furlough, then try and gather as many assurances and guarantees as possible. Things like a larger deposit, accepting certain restrictions, and adding another income into the mix can all help.
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