Across the UK, many people have been financially impacted, and many of those in the process of applying for mortgages have been left with questions since the start of the scheme in April.
Miles Robinson, Head of Mortgages at online mortgage broker Trussle, has shared some guidance to help furloughed borrowers.
What’s the deal with mortgage lenders and furlough?
At this time of uncertainty, it’s important that borrowers are clear when it comes to getting a mortgage. Being furloughed may affect how much you can borrow and the number of deals available to you. In most cases, you should be able to move forward with your mortgage if you provide a letter from your employer confirming your return to work once the furlough scheme has ended.
A homebuyer’s furlough story
Every borrower’s situation is of course different, and some furloughed borrowers will have a better experience than others. I caught up with 27-year-old Jodie Kenny, whose mortgage journey has been significantly affected by the furlough scheme. Jodie lives in a rented flat in Washington, Tyne and Wear. In January this year, she started looking for a house to buy in the same area. She found a property quickly, and her offer was accepted in early February. Around the same time, her mortgage was granted by Natwest.
Then lockdown measures were introduced, which caused a big delay in proceedings. Both Jodie and her solicitor were furloughed in April, and the original target sale date, 1st May, passed by.
“I of course expected a delay in proceedings because of the unprecedented situation. But, as my mortgage offer got closer to its expiry date, I started to worry about the sale going through on time,” says Jodie.
In July, Jodie’s employer announced redundancies, which brought even more uncertainty. “Although I was concerned about my job, I worked out that I could still afford the house purchase on my 80% furlough wages. I decided I wanted to go ahead with it,” she tells me. When Jodie applied to extend her mortgage offer, she was surprised and grateful when Natwest accepted. Despite being furloughed for a number of months, Jodie’s lender was willing to uphold her original mortgage offer. Jodie recently found out that she’ll complete on the property at the end of August, and that she’ll be moving into her new three-bedroom home in Tyne and Wear shortly afterwards.
Jodie’s story is an encouraging one, showing that for some furloughed borrowers there is light at the end of the tunnel.
Lenders policies
Mortgage lenders differ in their policies towards furloughed borrowers. Some will accept top up pay from your employer when calculating how much you can afford to borrow. However, most won’t accept your full bonus, overtime or commission pay. Here’s a round-up of the UK’s largest mortgage lenders’ approaches. For more details, visit the guide on Trussle’s website.
Clydesdale Bank
- Will they accept furloughed income? No
Coventry Building Society
- Will they accept furloughed income (80%)? Yes
- On what conditions? Maximum £2,500 per month.
- How about overtime/commission/bonus income? Will accept 50% of overtime/shift allowance/commission, if you can prove you’ve received over the last three months.
Halifax
- Will they accept furloughed income (80%)? Yes
- On what conditions? Maximum £2,500 per month.
- How about overtime/commission income? Will consider regular pre-furlough bonus, overtime and commission income.
HSBC
- Will they accept furloughed income (80%)? Yes
- On what conditions? Maximum £2,500 per month. Must provide a letter from your employer confirming that you’ll return to work within 3 months.
- How about overtime/commission income? Will accept 50% of overtime, bonuses and other allowances that were part of your income pre-furlough.
Nationwide
- Will they accept furloughed income (80%)? Yes
- On what conditions? You must be returning to work within the next 4 weeks.
- How about overtime/commission income? Will not be considered.
Natwest
- Will they accept furloughed income (80%)? Yes
- On what conditions? Maximum £2,500 per month.
- How about overtime/commission income? Will not be considered.
Platform
- Will they accept furloughed income (80%)? Yes
- On what conditions? Maximum £2,500 per month.
- How about overtime/commission income? Will not be considered.
Santander
- Will they accept furloughed income (80%)? Yes
- On what conditions? Maximum £2,500 per month.
- How about overtime/commission income? Will not be considered.
TSB
- Will they accept furloughed income (80%)? No, unless your income is being topped up to 100% by your employer.
- On what conditions? Employer must provide confirmation you’ll be returning to work and whether that’ll be on a full/part-time basis
- How about overtime/commission income? Will not be considered.
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