Can I remortgage when furloughed?

Answers to some of the most common questions we get asked

Many people in the UK have now been furloughed from work for more than six months, and though we are still in the midst of a pandemic, normal financial concerns continue to arise. One such concern is remortgaging your house, and how to do so while furloughed, if it’s possible at all.

The furlough scheme finishes at the end of October, and the government is replacing it with the Job Support Scheme, which starts from November. The government will pay up to 67% of the wages of workers at firms told to shut because of coronavirus rules.

If you are currently furloughed and are considering remortgaging these are answers to some of the most common questions we get asked.

Can I remortgage your property while furloughed from work?

In the simplest cases, yes, you can still remortgage when furloughed.

For example, if you’ve reached the end of an introductory offer on your mortgage, such as a 2-year fixed rate, and you’d like to switch to a different mortgage with the same lender, you can usually simply transfer. This will avoid your mortgage rate defaulting to the standard variable rate offered by your lender, which may be higher than the rate you were paying. Whether or not you are furloughed should make no difference to your mortgage transfer.

Can I remortgage with a new lender while furloughed from work?

This is where things get a little more complicated.

If you shop around for a better deal, rather than switching to a different deal with your current lender, the new lender would be required to perform a new affordability assessment. This is the series of checks they must make before lending a customer money, to ensure they are not allowing people to borrow more than they can pay back.

One of the factors that lenders will look at in their affordability assessment is your current income. When furloughed, your income is likely 80% of your usual income, so this is the figure mortgage providers will use. A new mortgage provider is therefore unlikely to lend you the same amount that you have currently borrowed.

For now, if you’ve reached the end of the introductory period on your mortgage, you might only be able to switch to the products offered by your current provider.

Can I increase my borrowing while furloughed from work?

Even if you’re sticking with the same mortgage provider, if you want to make any change to your borrowing (beyond simply switching products), they’re required to perform a new affordability assessment. And because their affordability assessment is based on a lower salary, your mortgage provider will be prepared to lend you less than they usually would.

If your current mortgage debt is not at the maximum that you can afford, it might still be possible to increase your borrowing, but this is not guaranteed.

Am I required to tell a lender that I have been furloughed when I remortgage?

If an affordability assessment is required, your mortgage provider will ask you for confirmation of whether you have been furloughed. You’ll need to provide documentary evidence, usually in the form of payslips.

What if my employer is paying top-ups?

In some cases, you may be furloughed but still receiving your usual salary, because your employer is adding to the 80% paid by the government. If this is the case, and you can provide documentary evidence from your employer, you’re far more likely to be able to remortgage.

Does a payment holiday affect my remortgage?

No, in most cases, it won’t make a difference.

As above, you’ll usually be able to switch to a different product with the same lender without an additional affordability assessment. You may not be able to borrow more, or switch lenders, but this is not due to the payment holiday.

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