The government’s furlough scheme was monumental not only in its size and scale, but also had ripples throughout every industry that deals with income and employment. The mortgage market is no different, and it is not hard to see why. One of the largest, if not THE largest part of a mortgage application is understanding, presenting, and proving people’s income. So how will your mortgage application be affected now that the scheme is coming to an end, and you are returning to work?
To understand the difference, let us go back to what it would have looked like for you before you were furloughed, or if the pandemic and scheme had not happened.
In a mortgage application, it is important that you, your adviser, and the lender’s underwriters understand your income. We need to know how much you earn, how often you are paid, and the sources of all the income, especially if there are multiple.
The most common way is to provide your three months most recent payslips, along with bank statements showing that income arriving in a bank account in their name. If you are paid weekly, we will ask for 4 weeks payslips.
If you receive additional income on top of your basic salary, such as overtime, bonuses, or commission, we may ask for your P60 to get an overview of your earnings in a year.
However, if you were furloughed, you may have been on reduced income and this could affect a mortgage application when it comes to how much a lender will let you borrow.
If this was the case for you, and you are now coming out of furlough, your adviser and the lender’s underwriter will typically want to see some evidence that your income has, or will, return to normal. Most lenders simply ask to see one payslip with your “normal” salary showing, however there are some who will request a letter from your employer confirming this. If this is the case, your adviser will be able to help you and your employer understand and provide the evidence the underwriter needs.
If you are applying for a mortgage whilst still on the furlough scheme, the lender will approve a mortgage for the amount that you can afford based up on your reduced pay.
We understand though that his has been a scary and eventful time – unlike anything seen before. Questions around income and affordability have never been more pressing, and a lot of the enquiries we get are around how much people might be able to borrow in the “new normal.”
Lender’s are updating their policies and requirements constantly however, so we recommend getting in touch for a free, no obligation chat with one of our advisers who can give you all the information you need.
You can call the team on 0345 094 1567 or email us at [email protected]
