Mortgages and Redundancy

Do you have to tell your mortgage lender if you are made redundant?

If you've been made redundant, it's easy to feel overwhelmed and informing your mortgage lender might be low on your list of things to do. Redundancy is such an emotionally draining experience that it is all too easy to forget that, for your mortgage lender, this is not an emotional matter.

Lenders base their decisions on risk, and you are a potential liability to them if they think that your situation has worsened or will worsen due to the redundancy.

You're not obliged to inform your mortgage lender that you have been made redundant, assuming that you can continue to make mortgage payments as usual.

However, if you are made redundant, you may struggle to make your monthly payments, so it is wise that you inform your lender before you default on mortgage payments.

Can I get a mortgage if I've been made redundant?

If you're at risk of being made redundant, this can impact your ability to get a mortgage. This is because you will need to declare to your mortgage lender that you are not expecting any changes to your situation. If you lie on your mortgage application, this is taken very seriously by mortgage providers and could constitute mortgage fraud.

It may be possible to get a mortgage if you are made redundant, but you need to provide detailed information on your financial situation. For example, if you are applying for a joint mortgage and your partner's income is secure, this could be enough to get a mortgage if your employment is not secure.

Mortgage lenders can turn down your application or offer a higher interest rate if they feel that the risks surrounding your application are too significant.

You must take professional advice before applying for a new mortgage after being made redundant. If your redundancy or unemployment is likely to be short-term, then it's best to wait until your situation has stabilised. This will give lenders the best chance of approving your application.

After you've been made redundant, it can take time to recover financially and put yourself in a better position to get a mortgage in the future.

What if I've taken voluntary redundancy?

If you have taken voluntary redundancy, this means that you are choosing to leave your job. Voluntary redundancies are often due to a better opportunity elsewhere or restructuring within the company.

Lenders don't see voluntary redundancies in the same way as compulsory redundancies. Therefore it should be easier to get a mortgage after being made redundant in this way. However, it's worth noting that if you are unemployed for a while, this will impact your ability to get a mortgage later on.

If possible, wait until you have found another job before applying for a new mortgage after being made redundant.

You should note that you might not get an insurance payout if you've taken voluntary redundancy.

Should I apply for a mortgage if I'm at risk of redundancy?

If you are at risk of redundancy, the timing is not ideal for applying for a mortgage. Whether or not you will be successful in your application depends on your circumstances and the terms of the mortgage you're applying for.

You will be required to declare that you are not expecting any changes to your financial situation, which is difficult if you're at risk of losing your job. If you're looking for a mortgage and are concerned about redundancy, you must look into all of your options before contacting lenders.

If you find yourself in this situation, it is best to apply for a mortgage when your employment and financial situation has stabilised. It would help if you prioritised getting professional mortgage advice before jumping in to make an application - and risking being declined by lenders. 

Being declined for a mortgage can impact future lending decisions.

Does redundancy affect my credit rating?

No, being made redundant doesn't impact your credit rating. This is because your credit rating is based on how you've managed your credit accounts, not your income.

As long as you're managing to keep up with monthly payments, your redundancy does not reflect poorly on your credit file.

What if I'm already in arrears with my mortgage?

If your employment is at risk, you must speak to your lender as soon as possible. It might be possible to renegotiate the terms of your mortgage so that you can manage payments until you've found a new job. If your payments are not in danger of defaulting, you should continue making regular repayments.

If your payments are already in arrears or you find yourself in financial difficulties, you must take action immediately to avoid repossession. Your lender will work with you to establish a payment plan that allows for enough time for you to find another job.

You should consider seeking professional debt advice from a service such as StepChange if you're struggling to pay your mortgage or other financial commitments. The stress of financial hardship can lead to periods of depression or anxiety.

If you're worried about your debts and the impact that redundancy might have, get in touch with a professional for advice and support. Many people seek debt advice every day in the UK and people are there to help.

What should I do if I was made redundant after I got my agreement in principle?

If you were already in the process of applying for a mortgage when you got made redundant, this could complicate things. This is because it's difficult to predict what your financial situation will look like after you've lost your job.

It might be possible to continue with your application even though you've been made redundant, but this depends on the terms of the mortgage agreement and your circumstances. If you're worried about making your payments and getting a mortgage after redundancy, it's important that you get in touch with your mortgage broker or lender as soon as possible.

If you continue with your application without advising your lender of your change of circumstances, this can confuse things further in the future. It could even be classed as mortgage fraud if you withhold this information.

We recommend getting professional mortgage advice before making your application.

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Redundancy after receiving your mortgage offer

If you've been made redundant after your mortgage offer, this can be a cause for concern. Lenders will closely analyse your situation and may decline your mortgage application. Most lenders have stricter lending criteria to ensure less chance of the loan defaulting.

You must be open and honest about your change in financial circumstances. Get in touch with your mortgage broker or lender as soon as possible to discuss what options are available.

If you decide to continue with your mortgage application, maybe because you feel that your redundancy is temporary, lenders will ask you for documentation of your unemployment. You might be asked to provide evidence of how long you expect to remain unemployed and proof of ongoing job seeking.

How to pay your mortgage if you've been made redundant

If you fail to keep up mortgage payments, you could lose your home in a worst-case scenario. If you have been made redundant, you may be worried about how to pay your mortgage or other bills.

You can take steps to reduce the impact on your personal situation. Here are a few ideas to consider:

• It might be possible to renegotiate your mortgage term with your existing provider. If you get in touch with your lender, they may offer support such as a mortgage holiday or other financial support.
• You can get free advice from a debt charity such as StepChange.
• You can also get in touch with an independent financial advisor specialising in helping people struggling financially.
• You may also have the option of transferring your mortgage to a different lender if you think they will offer better terms than your existing provider.

Does mortgage payment protection insurance (MPPI) cover redundancy?

Yes, mortgage payment protection insurance (MPPI) can help you with your mortgage payments in the event of redundancy or other reasons you cannot work.

Does income protection insurance cover redundancy?

Whether or not you are covered for redundancy will depend on your individual insurance. If you have short-term income protection, this typically covers you for short periods due to illness, accidents or redundancy for up to 12 months.

You will need to check the exact terms of your income protection policy to see if you are covered for redundancy.

Should you pay off your mortgage with redundancy pay?

If you are in a strong financial position despite your redundancy, and your mortgage deal permits overpayments, it could make sense for you to use your redundancy pay towards your mortgage. There are many factors to consider before you decide whether it makes sense to pay off your mortgage with the proceeds of your redundancy:

• Does your mortgage deal permit you to make overpayments without penalty?

• How much of your redundancy will you need to live on?

• Will you need your redundancy pay to make future repayments?

• Do you have a steady income from employment or other means?

• Are you sure that your redundancy will not be followed by further periods of unemployment?

If these factors are favourable, then paying off your mortgage with the proceeds of your redundancy could help to lower the amount you repay each month.

Should you take a mortgage holiday if you are made redundant?

Whether or not you apply for a mortgage holiday depends on your personal situation. If you can afford to carry on making mortgage repayments as normal even after being made redundant, then taking a mortgage payment holiday could be counterproductive.

This is because the interest on your mortgage interest continues to build during a mortgage holiday, which means your monthly payments are likely to be higher than if you hadn't taken a mortgage holiday.

If you do decide to apply, payment holidays can typically be granted for up to six months depending on the situation and your lender.

What benefits can I claim if I have been made redundant?

The benefits you are able to claim will depend on your personal circumstances. You may be eligible to claim Jobseeker's Allowance, which is a weekly allowance designed for unemployed people looking for work.

You may also qualify for other benefits depending on the number of hours you have worked, and whether or not you have children or a disability. You could be eligible for Universal Credit, Housing Benefit or Council Tax Reduction. If you are claiming income support, the amount you will receive is likely to depend on your family income and capital.

Mortgage redundancy checklist

Here's a checklist of things to do if you are newly redundant:

• Work out all of your household bills, mortgage and repayments on other debts to get a good understanding of your financial position and calculate your monthly budget.

• Find out how much your mortgage is currently worth by asking your lender or checking your mortgage statement.

• Estimate the value of any equity in your home, by using a property evaluation service online.

• If you are suffering financial problems, contact your mortgage provider as soon as possible to discuss your options.

• Do some research and find out if it's possible for you to transfer your mortgage to a new lender or broker who can offer you better terms than your current deal.

• Find out if you are eligible for mortgage protection insurance.

• Find out if you are eligible for certain benefits such as universal credit, tax credits, support allowance or pension credit.

• Think about whether it makes sense to use the proceeds of your redundancy to pay off any outstanding credit card balances, store cards and personal loans, or even make overpayments on your mortgage.

• If you are struggling with debt, it may be beneficial for you to speak to an independent financial adviser before making any decisions about how to use your redundancy pay. They are likely to be able to offer impartial guidance that will help you make more informed choices about your situation.

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Redundancy is a situation in which a person is laid off or forced from a job through no fault of their own. This can be a scary time for you and your family, but with the right mortgage advice, it's possible to have financial security.

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