If you're applying for a mortgage after being made redundant, this blog explains what lenders are looking for and how to give your application the best possible chance of succeeding.
Being made redundant is one of those things you don't really plan for.
What will it mean for your finances? For your plans? For the mortgage you were halfway through applying for, or had just started thinking about?
Redundancy doesn't automatically rule out getting a mortgage. As with many things financial, it depends on your circumstances, and the picture is more varied than it might first seem. This blog explains what lenders are looking for, what your options are and how to give your application the best possible chance of succeeding.
What happens to a mortgage application if you're made redundant?
There are two situations most people find themselves in when facing redundancy. The first is being made redundant while your mortgage application is already in progress. The second is starting a fresh application after you've been made redundant.
In both cases, the issue comes back to affordability. Lenders need to be confident that you can meet your monthly repayments, and that confidence is built on stable, ongoing income. While a change in your employment status can disrupt that picture, it doesn't always end it.
If redundancy happens while your application is underway, the most important thing you can do is tell your broker or lender promptly. It's tempting to say nothing and hope it goes unnoticed, particularly if you're close to completion. But lenders carry out checks throughout the process, and a change in employment that comes to light at the wrong moment can be far more damaging than disclosing it early. Getting ahead of it at least gives your broker the chance to manage your situation properly.
If you're starting from scratch after redundancy, the options available to you will depend on how long you've been out of work, whether you have a new role lined up and how much deposit you have. The type of mortgage you need will also shape what's available to you.
A remortgage, particularly where there's meaningful equity in your property, will tend to be viewed more favourably than a new mortgage with a high loan-to-value. The lender's exposure is lower, so they may be more willing to take a considered view of your employment situation.
The same applies if you're moving home, as the equity you've built up in your current property can work in your favour. The more you can bring to the table from the sale, the less you're asking a lender to take on. While it doesn't remove your employment situation from the equation entirely, it does give lenders more to work with when assessing your application.
If you're looking to borrow more against a property you already own – a further advance – the picture is mixed. Your existing lender already knows your payment history, which can count in your favour. But they'll still want to be satisfied that you can meet the increased borrowing, which means your current income will come under scrutiny in the same way it would with a new application.
And if you're a first-time buyer with a small deposit and no current income, your options may be more limited, but it doesn't mean the door is shut. It may mean adjusting your timeline, or looking beyond the high street to lenders who take a more flexible view.
What are your options if you've recently been made redundant?
The most straightforward route is to wait until you're back in employment. Once you have a new role and a payslip or two to show for it, your picture will look more stable. Some lenders will consider an application after as little as one month in a new job. Others prefer three to six months of employment history before they'll lend. An experienced broker who knows the market can identify which lenders take a more flexible approach.
If you received a redundancy payout it can work in your favour, up to a point. Lenders need to understand how you'll meet your repayments month to month, not just right now. Having a lump sum in the bank can help demonstrate financial resilience and show your lender that you're not under immediate pressure. But on its own, it won't be viewed as a substitute for a reliable, regular income.
Some specialist lenders are comfortable lending to customers with complex borrowing needs, including those who have recently been made redundant. Their rates are typically higher than standard market rates, and their deals don't tend to appear on price comparison websites, so you'll need to go through a specialist mortgage broker. But in the right circumstances, particularly if you need to move quickly or your employment history is complicated, they can represent a workable route through.
And if you're applying with a partner or co-applicant who has a more stable income, a joint application can significantly strengthen your overall position. Many lenders will look at your combined income and affordability, which can go a long way toward offsetting the impact of one applicant being between jobs.
What will lenders want to see?
Whatever your employment situation, there are things within your control that can improve how a lender will view your situation.
A written job offer or signed contract can add real weight to your mortgage application, even before you've started in your new role. Some lenders will consider an application at that stage, provided the contract is in place. It's worth exploring this rather than assuming you must wait until your first day with your new employer.
A clean credit record during a spell of unemployment can show lenders that you can manage your financial commitments responsibly, even through a difficult period. Demonstrating that you have savings and financial reserves behind you, enough to cover repayments through a period of transition, will also give lenders confidence that you can absorb any short-term disruption without things unravelling.
The size of your deposit matters, too. The more equity or deposit you have, the less risk a lender is taking on, which can open doors that a smaller deposit would keep closed.
And then there's the way your case is presented. Any gaps or changes in your employment status aren't necessarily deal-breakers, but they need to be explained clearly and put in front of the right lenders. Knowing who those lenders are, and how to frame your situation in the best possible light, is where a good mortgage broker can add real value to your application.
What if you're worried redundancy might be on the horizon?
If you haven't been made redundant yet but can see it coming, acting before it happens is the most useful thing you can do. Being proactive almost always gives you more to work with than waiting for events to force your hand.
Getting an agreement in principle now, while you're still employed, locks in an affordability assessment based on your current income. Then, if your situation changes, you'll be in a stronger starting position.
Speaking to your mortgage broker early also means you'll have a better understanding of your options before they become urgent decisions. And if you're already in the process of viewing properties or negotiating on something, knowing where you stand will help you move forward with confidence.
How can FG & Cook help?
Redundancy is stressful enough without having to figure out who'll lend in your situation, what to disclose and how best to present your mortgage application.
At FG & Cook, our team has spent more than 50 years in the mortgage market, building the kind of lender relationships and knowledge that can make a real difference when your circumstances aren't as straightforward as they could be.
We know which lenders are happy to work with borrowers with complex employment situations, and how to present your application to give it the best possible chance of success.
So, if you're facing redundancy and you're not sure where you stand, a conversation with us is the best place to start. Book a consultation with our team today to learn how we can help you.