Can I remortgage if I’ve been furloughed?
Can you remortgage when furloughed? How will being furloughed impact how much you can borrow? Read everything you need to know and get fee-free expert advice
May 21, 2020
The government’s Coronavirus Job Retention Scheme (CJRS) – or furlough scheme – pays grants to any employer that furloughs its staff instead of letting them go. The grants are worth 80% of wages up to £2,500 a month, and employers have the option to top this up to 100%.
Can I remortgage when furloughed?
- If your current fixed term mortgage is about to end and you are remortgaging onto another product with your existing lender (i.e. switching mortgage rather than defaulting onto their usually more expensive standard variable rate), the fact you are on furlough is unlikely to impact you. A product transfer can usually be done over the phone or online and your mortgage advisor can often put it in place for you. Product transfers don’t usually involve affordability assessments so being furloughed won’t make a difference.
- However, if you’re extending your borrowing with your current lender as part of a remortgage, your lender will need to assess your finances. Reduced furlough income could affect how much you can borrow.
- If you are hoping to shop around to remortgage onto a new, cheaper mortgage deal and you have been furloughed, a lower income will have an impact on your mortgage application.
Can I remortgage with a new lender when I’ve been furloughed?
As with all things in life, you need to shop around to find the best deal. So simply transferring your mortgage to another product offered by your lender may not be the best solution.
However, remortgaging to a new lender if you have been furloughed could be problematic.
A change in income would affect an application that has already been made as it may need to be reassessed.
Lenders will want to assess affordability based on your current income – which is likely to be 20% lower than usual.
Lenders have been clarifying their criteria on furloughed income and most will take it into account for affordability purposes. For example, Nationwide has said that furloughed applicants will be assessed based on 80% of their usual income up to £30,000 gross. Employer top-ups will also be taken into account subject to written confirmation. While Coventry Building Society will only take applications up to 65% loan-to-value (LTV).
If being furloughed has reduced your total income it could reduce the amount you are able to borrow. If that is the case you may want to consider other options, such as extending the term of the mortgage to help with affordability.
Looking to remortgage but not sure now is the right time? Get fee-free advice from our mortgage experts at L&C
Can I remortgage without telling my lender I’ve been furloughed?
No sorry, that won’t work. Many lenders are recognising that borrower situations may have changed in light of the coronavirus and so are likely to ask you to confirm that there has not been a change in circumstances if you have already applied.
Any mortgage application will need back up payslips to evidence declared income.
Can I remortgage if I’ve taken a mortgage holiday?
On Tuesday 17 March 2020, the government announced that all homeowners can claim a three month “holiday” from their monthly mortgage repayments if they were struggling financially following the onset of coronavirus and lockdown measures. As of April 28, 1.6million payment freezes had been granted, according to UK Finance – accounting for around one in seven UK mortgages.
UK Finance has also confirmed that banks and building societies have collectively agreed to allow customers who’ve taken mortgage payment holidays to make product transfers with your current lender without requiring an affordability assessment.
Taking a payment holiday should not affect the credit record so in theory it shouldn’t affect your chances – but if you need a payment holiday because your income has been affected substantially then this will affect your ability to meet affordability requirements.
It’s best to speak to a fee-free mortgage broker who can investigate product transfers and search the market to give a good overview of the best options.
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