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Will being on furlough impact your mortgage?

What does being “furloughed” mean to you? Please note that I’m not an accountant but just sharing the information as I understand it and how it could impact your mortgage.

Clients have been asking what being “furloughed” will mean to them. The actual use of this scheme is to allow employers to keep their employees on the payroll during this difficult time when the alternative would likely to have been to make people redundant. The scheme will pay up to a maximum 80% of the gross salary received in February up to a maximum of £2500 per month. Employers have the option of making up the 20% difference but not all of them can do so. This is only a short-term solution. The employer will make the payments in the normal payroll and have to claim the money back from the Government. This isn’t something that should concern the employee, unless their employer doesn’t have the cashflow to pay them until the funds are received back from the Government.

Hopefully we can reassure our existing clients that when we completed their latest mortgage, what seemed to be, at the time, the boring “affordability/budgeting assessment” page on our Fact finding process will show that it was a vital part of the affordability assessment process. In the “affordability/budgeting assessment” we allowed for all expenses such as all utility bills, food, credit commitments as well as making some contingency savings for holidays, a monthly spend on clothes and socialising.  Within this budget, we also allowed a “buffer” to ensure that if interest rates were to increase, or any unexpected costs came up, our clients would be able to manage financially. Having taken this product budgetary assessment, we hope that this will now be providing a degree of comfort whilst your earnings are impacted by the Coronavirus. We all know that in the present climate, there isn’t much socialising going on, so hopefully this will free some cash from your usual budget that will help you to manage your essential costs.

It may be that you need to take up the option of a payment holiday with your current mortgage provider. To do this, you can either call then directly or complete an online questionnaire. We are assured that this won’t impact on your “credit score” and this has been confirmed by the various agencies and lenders. If you need us to provide the details of the process being adopted by any specific mortgage lender, please just drop us a message and we’ll be happy to guide you through it.

If you do take a payment holiday, the deferred payment will either be added to the term of your current mortgage, or you can increase repayments when your finances allow you to recommence your payments. This will depend on the individual mortgage lenders, but please contact us directly if you would like to discuss your options going forward – we are here to help.

Mortgage lenders are making countless amendments to their underwriting criteria and we are receiving these updates not just daily but throughout the day, so it’s a very fluid position. The changes we have seen include reducing the overall loan to value that they will lend up to, to only using your reduced income if you have been furloughed. The latter I can fully understand. The valuation change has been brought about by the mortgage lenders not being able to do any physical property valuations, hence taking a cautious approach to any new mortgage applications

We have also seen that credit card companies and loan providers are also now starting to offer similar “payment holidays”. It’s very important to point out that you must make contact with your creditors if you can’t make payments and that you continue to make minimum payments until any “payment holiday” is approved. This will ensure that your “Credit Score” is not adversely affected.

If you do have concerns about how you are going to manage over the next few months and want to discuss your personal situation, please just contact us. It may be that a few tweaks are all that’s needed. Talking through your concerns with someone else can make such a difference.

If you are thinking of the direct impact being furloughed could make to you and you are thinking of reviewing your existing mortgage arrangements or even getting onto the property ladder when restrictions are lifted, this isn’t something that we can answer generically. Please contact us to ask any specific questions by making contact by phone, 07818-420621 or direct e-mail to info@mortgage-consultancy.co.uk.

We at Acclaimed Mortgage Consultancy are here for the long term to support our clients, old and new, to get through this difficult time.

By working together, we will get through this and be stronger for it.

Stay safe, Stay home and together we can help the NHS.

If you have any questions about mortgages or need advice, please call 01676 533658 or email info@mortgage-consultancy.co.uk.