Written by, Marija Petkova
Updated May, 26, 2022
During the coronavirus crisis, many employees were placed on furlough, which knocked the confidence of many potential buyers in the mortgage market.
So, how does being on furlough affect your chances of getting a mortgage, can you get a mortgage on furlough, and what happens after you return to work?
Let’s find out.
It is possible to apply for a mortgage while being on furlough, though it might be tricky to get a good deal.
The process of applying for a mortgage while on furlough is the same as applying for a mortgage with a full income.
If you want to get a mortgage while you’re still on furlough, you can:
There’s no reason why you shouldn’t be able to get a mortgage after being on furlough. In fact, your chances of getting a mortgage will improve after you get back to work.
The lender will still ask you to provide:
While getting a mortgage on furlough is not impossible, relying on furlough income can significantly shrink the pool of lenders.
Some lenders do not accept applications from furloughed workers and those that do require applicants to provide proof that their boss is committed to keeping them employed. Others only accept applications from people whose employers top up their wages.
The furloughed income also limits the amount you can borrow because loans are calculated based on how much you’re earning at the time of your application.
For example, if you earn £25,000 a year, you’ll likely be able to borrow a maximum of around £112,500. But if you’re on furlough and are only receiving 80% of your salary, which would be around £20,000, then you wouldn’t be able to borrow more than £90,000.
Regardless of whether you’re applying for a mortgage with furlough or any other type of mortgage, your eligibility depends on a few factors, including:
Ultimately, if you want to speed up the application process, there are several documents you should prepare to ensure furlough mortgage approval:
Worth noting: It’s advisable to ask your mortgage adviser to check your documents and eligibility before you start sending applications.
Mortgage lenders that do not accept furloughed income are:
Mortgage lenders that accept applicants on furlough income are:
*Correct as of 14 April 2021
Being furloughed doesn’t mean you can’t apply for a mortgage, but finding a good deal will likely prove more challenging. Lenders primarily consider the current income of the applicant when deciding whether to approve the applicant so it’s best to speak to a mortgage advisor before diving into the mortgage market.
Before the pandemic hit, most lenders accepted 50%-60% of variable sources like bonuses or commissions. They stopped accepting variable income during the pandemic but some of them later relaxed their restrictions.
As long as your employment situation is stable, it’s possible to remortgage after a furlough and you might even secure a more favourable interest rate.
After being extended several times since it was officially introduced in 2020, the furlough scheme ended in September 2021.
Yes, it is possible to get a mortgage while being on furlough, though your income will directly affect the amount you can borrow. Also, not every lender accepts applications from furloughed employees.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.