I’ve lost my income because of Covid-19: Can I still apply for a mortgage?
During these unpredictable times, many workers have seen a dramatic reduction in their income, with many unable to earn throughout the coronavirus.
Self-employed workers are particularly vulnerable with some lenders already cautious to lend to applicants with unstable incomes,
So what does this mean for those that had hopes of applying for mortgages in the near future? Will a dip in income prevent their mortgage applications from being approved or will some lenders consider taking other factors into consideration?
Can you apply for a mortgage without a job or income?
Lenders typically prefer borrowers with secure forms of income as this suggests a good likelihood that they can continuously keep up with their mortgage repayments.
Though it is possible to apply for a mortgage without an income or job, your choice of lenders will be reduced as you won’t meet the income criteria that many lenders require their borrowers to meet.
Joint mortgages
If you’re applying for a joint mortgage, you may be able to proceed with your lender depending on their affordability criteria and stance during the coronavirus.
Though every situation will be different, if your partner still has an income and it proves sufficient enough to pay the mortgage and other expenses, your lender may be satisfied that as joint applicants you can afford the loan.
Some lenders are able to take income from benefits into consideration too, so ask your mortgage broker for advice about the lenders that are most likely to accept you.
Will the amount we can borrow be reduced?
The amount you're eligible to borrow with one income will generally be lower than the amount you could have applied for had there been dual incomes on the application.
Therefore, while you may be able to get a loan, it may not be enough to buy the property you had in mind.
Always seek advice from a mortgage broker before proceeding with an application, especially given the current uncertainty surrounding incomes and recent Bank of England interest rate changes.
What can you do if you have lost income because of Covid-19?
In light of the recent economic situation the government announced that employees who are unable to work during the coronavirus crisis may be eligible for the below.
“If your employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of your wage, to avoid redundancies.
If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off.
To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.
You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to.
If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.
The Government intends for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.
For official guidance and for advice about what to do if you’re self-employed, see the Government’s official website.
If I temporarily have no income, should I apply for a mortgage?
Whether you should apply for a mortgage right now is dependent on your own circumstances. It may be the case that your income is only temporarily reduced, so your lender may be satisfied with proof of future income, in the form of a letter or contract from your employer.
Whatever your situation, our brokers are here to provide confidential advice tailored to help you, so whether you’re a first time buyer, remortgaging during Covid-19 or are worried about whether you won’t meet the income criteria, give us a call on 023 8023 5555.
023 8023 5555