I am in the middle of buying a home and have had my mortgage application approved. However, I have just been told my company is making me redundant because of the coronavirus hurting their finances.
Do I need to tell my mortgage lender as I am pretty confident I’ll be able to get another job quickly so it shouldn’t affect my ability to keep up with repayments? If I don’t tell them, will they find out anyway?
Their dream home is within reach, they’ve received their mortgage offer and then they’ve had bad news from their employer because it has taken a financial hit amid the ongoing Covid-19 crisis.
I’ll not beat around the bush in my answer to your question: in all cases, you have to be completely honest with your lender, not just because it’s the right — and contractually binding thing to do — but because, as any decent mortgage broker will advise you, it’s in your own best interests.
After all, what we’re talking about here is you taking on probably the biggest debt of your life with no guaranteed means to pay it, which when you think about it like that is a pretty crazy and irresponsible thing to do. Okay, you could get lucky and get your next job, but what if you don’t because so many employers are also struggling right now, and there is huge competition for every available position? Also, as the furlough scheme is unwound, many are predicting unemployment levels will soar and if that happens getting a job may not be as easy as you think.
You should bear in mind that’s it’s the first few months of homeownership that are typically the most expensive as you renovate and buy new furniture.
In other words, you’ll be facing a huge income squeeze just as your outgoings explode. You’re then at risk not just of losing your home, which is a traumatic experience in itself, but also ruining your credit file and taking homeownership off the cards altogether for potentially many years to come.
In other words, the risks are so punitive that you have to ask yourself, is it really worth it?
For me, without a doubt, the only thing you can do, as hard and upsetting as it is, is to come completely clean with both your estate agent and lender, ask to put your mortgage application on hold, and focus 100 percent on getting a new job and a steady new income. With a bit of luck, you could land the job you thought you would, be in your new home next year after a short delay, and have saved yourselves endless stress, uncertainty – not to mention a decimated credit score and all the damage to your personal finances which that involves.
Put simply, think of it as a bit of short-term pain for long-term gain.