With so many British workers still relying on the government’s furlough scheme at the start of the new year, hopes of saving for a deposit and climbing the property ladder seem nothing but to many who are understandably worried about their future a distant dream to be career prospects and financial stability.
As new fears grow among buyers, Pete Mugleston, mortgage advisor and MD joins www.onlinemortgageadvisor.co.ukhas compiled the following tips for those who are or have been on furlough to ease concerns.
When you’re on vacation and back to work
If you’ve been taken off vacation and are now back to full-time work, there shouldn’t be many problems submitting a mortgage application. However, if you’ve just returned to work and are planning to buy a property, your lender may proceed with caution, as a prior leave of absence could indicate your position is at risk of future layoffs.
It becomes more difficult to have a successful application
An important factor that banks look for when evaluating a mortgage is a stable income. During leave, the government has paid between 60% and 80% of an employee’s earnings, with the employer having the option to top up the remaining amount. Some banks do not consider vacation pay a reliable or sustainable form of income, although others may have exceptions. Therefore, it is really important to consult an experienced broker and find out which lenders can accommodate your situation, as luckily there are several.
If successful, there may be fewer mortgage options
If you are successful with an application because there are fewer lenders, you may have fewer and more restrictive mortgage options to choose from. It’s also likely that you’ll need to post a larger deposit depending on the maximum loan-to-value that the lender is willing to provide. However, if your partner has full, non-deferred income to support the weight of the application, you should find a wider range of options.
A challenge for the self-employed
Trying to get a mortgage as a self-employed person was already a daunting task before the pandemic, so given the circumstances it’s even more of a challenge for those who don’t have a stable and regular income.
Lenders are now struggling to demonstrate what an ongoing and sustainable business looks like in the current climate, with some businesses struggling temporarily that are sure to bounce back and others booming but anticipating a market that may be short-lived if things get back to normal.
Government support options such as CBILS loans, bounceback loans and the Self Employment Income Support Scheme (SEISS), which helped the self-employed by giving them 80% of their three-month earnings in one lump sum, have been vital for many businesses to survive. Consequently, some lenders believe that when an individual or business requests them, it could be an admission that they are struggling financially, and therefore do not accept mortgage applications from those who have applied. However, some lenders allow you to explain why you are applying for the grant and decide whether to accept your application.
No debt restructuring problems
If you already have a mortgage and it’s nearing the end of its fixed term, you should be able to stay with the same lender and switch mortgages whether you’re on furlough or not. As long as you don’t apply for another loan, it should be fine to move to a new business with no further evaluation required. However, moving to a new lender will be more difficult, so it’s best if you stick with your current one.
You should consult a mortgage advisor
It is important to take these tips with caution as everything changes like the weather in the current climate. As such, it is best that you consult a mortgage advisor about your options before you begin submitting your applications. Your mortgage advisor can look at your situation independently and find the best lender that will accept your income and situation, so it’s definitely worth it.