With average house prices at their highest level for 7 years, many people are beginning to look ahead to the spring and summer and assessing their options when it comes to their current home.
Recent data shows that average house prices ended 2020 at their highest levels since 2014, a trend driven by both the Stamp Duty holiday, which saw the Government suspend Stamp Duty Land Tax on the first £500,000 of any house purchase and a lockdown which prompted many to reassess what they need from their homes.
With demand outstripping supply, house values hit a premium, driving growth in a year which, at the start of April 2020 and the effective closure of the housing market, many would have thought unlikely if not impossible.
But while there are many people who took advantage of the incentives on offer, others who found themselves in less certain financial situations were forced to put any plans they may have had on hold for a few months.
At the time of writing the Government has extended the Job Retention Scheme – or furlough scheme, as it has become known – to the end of April and those who have been part of the scheme but are now preparing for a return to work may well be reconsidering their options.
One of many hurdles to overcome in a house move is securing the mortgage to buy your new dream property.
Two questions we’re regularly being asked at the moment is whether it’s possible to get a mortgage if you’re on furlough or if having been on furlough is likely to make it tricky to get a mortgage once you return to work.
There’s no binary answer to either question because it’s more complex than a simple yes or no allows. But I’ll try to answer both questions like this:
First and foremost, you need to bear in mind that what mortgage lenders are looking for when they’re presented with a mortgage application is as much assurance as possible that the person they’re lending the money to will be able to afford the repayments.
That, in a nutshell, is their first and only interest.
To gain that confidence in you as a borrower, they need to be satisfied that you have a solid financial history, that you live where you claim you live and that your income arrives regularly and exceeds your outgoings sufficiently to cover your mortgage repayment.
So, in that context it’s already clear that your being on furlough or having been on furlough is going to be a consideration for any lender because a) your income has reduced to 80% of its previous level and b) your job and income may be affected by further events in the pandemic story.
However, every borrower is different, so the whilst the fact you are on furlough or have spent time on furlough may raise a flag, each lender who is prepared to consider applicants in your situation will look at your individual circumstances on their own merit.
Assuming all other things are equal – that you have a good credit history, that your fixed outgoings don’t exceed your income and that you have a good record of employment – then there’s no reason why you should automatically be declined a mortgage.
But you shouldn’t be surprised to find there’s greater scrutiny over your application and perhaps a more extensive process as the lender assesses your future financial security.
I would always recommend homebuyers work with a professional mortgage adviser simply because it makes the application process much smoother and an adviser can ensure your application contains the correct information, presented in the right way.
However, that advice is especially important when your circumstances fall outside the norm since an adviser will have a greater understanding of each lender’s policy and approach with regard to lending that may be considered to be a greater risk.
An adviser will have a much better understanding of which lenders will be more likely than others to approve your application, making the whole process less stressful and less onerous for you.
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.