The COVID-19 pandemic brought unique challenges to the global economy, and one of the most significant impacts was the introduction of furlough schemes in many countries. In the UK, the Coronavirus Job Retention Scheme (CJRS) allowed employers to furlough employees, meaning they were temporarily laid off with the government covering a portion of their wages. While this scheme provided financial relief to millions, it also raised questions about how furlough affects mortgage applications and eligibility. This article delves into the details of furlough mortgages, how they work, and what borrowers need to know. Additionally, we’ll explore how future planning and wealth management can help navigate these challenges.

 

What is a Furlough Mortgage?

 

A furlough mortgage refers to a mortgage application made by someone who is currently on furlough or has recently been furloughed. Being on furlough means that an individual is not working their full hours or is temporarily unemployed, which can impact their income and, consequently, their ability to secure a mortgage.

 

Lenders typically assess mortgage applications based on income stability and affordability. Since furlough represents a temporary reduction in income, it can complicate the mortgage application process. However, being on furlough does not automatically disqualify someone from getting a mortgage. Many lenders have adapted their policies to accommodate furloughed workers, but the terms and conditions vary widely.

 

How Does Furlough Affect Mortgage Applications?

1. Income Assessment

Lenders evaluate an applicant’s income to determine their ability to repay the mortgage. For furloughed workers, lenders may consider:

• The furloughed income (80% of the regular salary, up to a cap, as per the CJRS).
• The applicant’s pre-furlough income, especially if they are expected to return to full-time work soon.
• Any additional income sources, such as bonuses, overtime, or side hustles.

 

2. Employment Stability

Lenders prefer borrowers with stable employment. Being on furlough can raise concerns about job security, especially if the employer is struggling financially. Some lenders may require proof that the applicant’s job is secure or that they will return to full-time work after the furlough period.

3. Creditworthiness

A good credit score is crucial for mortgage approval. Furlough itself does not directly impact credit scores, but financial difficulties during the furlough period (e.g., missed payments) can harm creditworthiness.

4. Lender Policies

Each lender has its own policies regarding furloughed workers. Some may be more flexible, while others may impose stricter criteria. It’s essential to shop around and compare lenders to find one that suits your situation.

 

Can You Get a Mortgage While on Furlough?

Yes, it is possible to get a mortgage while on furlough, but it depends on several factors:

• Returning to Work: If you can demonstrate that you will return to full-time work soon, lenders may be more willing to approve your application.
• Deposit Size: A larger deposit can improve your chances of approval, as it reduces the lender’s risk.
• Affordability: Lenders will assess whether you can afford the mortgage payments based on your furloughed income and other financial commitments.
• Specialist Lenders: Some lenders specialize in working with borrowers who have non-traditional income sources or temporary reductions in income.

 

Tips for Applying for a Mortgage While on Furlough

1. Provide Evidence of Job Security
   • Obtain a letter from your employer confirming your furlough status and expected return-to-work date.
   • Highlight any assurances of job security or future income stability.
2. Improve Your Credit Score
   • Pay bills on time and reduce outstanding debts to boost your creditworthiness.
3. Save for a Larger Deposit
   • A larger deposit can make your application more attractive to lenders.
4. Seek Professional Advice
   • Consult a mortgage broker or financial advisor who specializes in furlough mortgages. They can help you navigate the complexities and find lenders with favorable terms.

Future Planning and Wealth Management

Navigating furlough mortgages can be challenging, but with the right planning and wealth management strategies, you can secure your financial future. Here’s how:

1. Budgeting and Saving

• Create a budget to manage your finances effectively during furlough.
• Build an emergency fund to cover unexpected expenses.

2. Debt Management

• Prioritize paying off high-interest debts to improve your financial health.

3. Long-Term Financial Planning

• Work with a wealth management advisor to create a long-term financial plan that aligns with your goals.
• Consider investments, pensions, and other wealth-building strategies.

4. Mortgage Advice

• Seek expert advice on mortgage options, including remortgaging or switching to a more favorable deal.

5. Insurance and Protection

• Ensure you have adequate insurance coverage, such as income protection or critical illness cover, to safeguard against future uncertainties.

Why Choose Future Planning Wealth Management?

Future Planning Wealth Management (FPWM) is a trusted partner for individuals navigating financial challenges, including furlough mortgages. Their team of experts provides personalized advice and tailored solutions to help you achieve your financial goals. Whether you’re applying for a mortgage, planning for retirement, or managing investments, FPWM offers comprehensive support to secure your financial future.

 

Conclusion

Furlough mortgages are a viable option for many individuals, but they require careful planning and consideration. By understanding how furlough affects mortgage applications and taking proactive steps to improve your financial position, you can increase your chances of approval. Additionally, partnering with a wealth management firm like Future Planning Wealth Management can provide the guidance and expertise needed to navigate these challenges and build a secure financial future.

If you’re currently on furlough and considering a mortgage, don’t hesitate to seek professional advice. With the right support, you can turn a challenging situation into an opportunity for long-term financial stability.

 

For more information and personalized consultation, visit Future Planning Wealth Management.