Can I Remortgage While Furloughed?

The COVID-19 ‘lockdown’ and the subsequent jolt to the World’s economy has been a unique challenge for all of us. Due to the government’s decision to close businesses and effectively isolate people in their homes, the furlough scheme was introduced for employees unable to work. This scheme effectively enabled the government to pay employees that would otherwise have been laid off, without pay.

If you have an interest-only mortgage coming to the end of its term or your initial fixed-term period is about to expire, you are more than likely going to need to re-mortgage. When fixed term rates end, most mortgages revert to the lender’s standard variable rate and with so many lenders out there in the market, your lender’s SVR is unlikely to be competitive. This is why we always recommend that our clients periodically check in with us so that we can assess the market and keep you saving money.

So, what if you need to remortgage but you are currently furloughed at 80% of your salary or £30,000 per annum, whichever is the lesser?

Some of the UK’s top mortgage lenders have intimated that existing customers remortgaging on a like-for-like basis won’t need to undergo ‘affordability assessments’ which, if furloughed on a lower income than your usual one, might previously have caused significant problems for those looking to remortgage. This means there should be no negative effects for people looking to remortgage with their existing lenders.

Also, UK Finance has confirmed that banks and building societies have collectively agreed to allow customers who’ve taken mortgage payment holidays to make product transfers without requiring an affordability assessment. This is good news and should mean that taking a mortgage repayment holiday due to the COVID-19 situation should have no impact on your ability to switch with your current lender.

However, if you are looking for a new mortgage or wish to remortgage with a different provider then you will need to comply with affordability assessments. Each lender seems to be approaching this issue in a different manner. Some lenders are taking each case on its own merits. Others are limiting Loan to Value to 65% or only assessing based on the furloughed salary. Others still, are taking into account any top-up paid by employers although in some cases lenders are requesting letters from employers confirming their intent to re-employ.

Whatever your situation, it makes sense to explore the options open to you sooner rather than later. We usually recommend that we have a chat with our clients about 4 - 6 months before they need to remortgage so as to give them time to make an informed decision.

For more information please contact us on 01628 507477 or click here to book a free phone or video appointment.