What are the effects of being furloughed?
During the current COVID-19 crisis we have seen unmeasurable changes across the globe which are affecting each and every one of us.
Research from April suggests that 7 out of 10 employers have furloughed staff, whilst unemployment also grew to 4%. This certainly is leaving people with more and more uncertainty around their finances and we would like to provide some information on how mortgage lenders are treating employed and self-employed customers during this crisis.
The first thing to highlight is that mortgage companies and solicitors, like most, are not immune to the current outbreak and therefore a lot of staff have either been furloughed themselves or working from home so the time taken to both underwrite your application and to complete the required legal work is taking around 50% longer than normal to complete.
If you’ve been furloughed by your employer or are self-employed and claiming under the governments furlough scheme then the good news is that mortgage lenders will be able to accept an application from you.
For employees, the lenders accept up to 80% of your income up to a maximum of £2,500 pm. If your employer is funding the difference between your furloughed income and your usual basic salary, then this can be accepted if you’re able to provide written confirmation from your employer that this will continue. Another consideration for furloughed employees is that any historical bonuses, commission or overtime are unlikely to be taken into account for affordability purposes or if they are they’ll use a lower percentage than previously.
For Self-employed applicants, we have seen that the majority of lenders are now assessing their application in much greater detail. They will need confirmation if your business has been affected by the COVID-19 outbreak and in a lot of cases, will ask applicants to provide the latest 3 months business bank statements. However, as with employees, the mortgage lenders will only accept up to 80% of your salary/pre-tax profits to a maximum of £2,500 pm.
How are the lenders helping their existing customers and customers of who have applied?
Existing mortgage customers have been able to request a mortgage payment holiday of up to 3 months and recent figures suggest that only 1 out of 9 households have applied for a payment holiday. As long as you’re not in arrears on your mortgage the lenders will spread the payments from your mortgage holiday over the remainder of your term, without having any negative affect on your credit score.
For customers who have applied to remortgage or move home, most mortgage lenders are extended their offers by up to 3 months, ensuring that applicants have sufficient time to complete the required legal work and complete their transaction.
If you’ve been furloughed and want to discuss your mortgage options, or if you’re thinking or moving home or remortgaging in the near future, then please get in contact with the team and we’ll be happy to answer any queries and assist you however we possibly can.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The IMA Team