Furloughed after Mortgage Offer - Broker says not a problem, is this right?

donkeyk22

Hi all,
As above, we received a mortgage offer from the lender on 23/03 and my wife was furloughed (on 80% of salary) on 01/04.
We are looking to exchange in the next week or two and I have already advised the broker of the situation regarding the furlough, in order to make sure this isn't considered a material adverse change by the lender. They replied that the furlough doesn't affect the offer.
I accepted this at face value at the time but the solicitor has sent a letter more generally about the mortgage offer and made the point about the lender refusing to release funds after exchange based on material adverse change...and now I'm concerned the broker might be being economical with the truth to avoid the purchase (and their commission) falling through.
So is the broker correct, or should I insist either the broker or the solicitor formally notify the lender? If so, are the lender likely to withdraw the offer?
Thanks.

MovingForwards

Who is the lender?
Were you borrowing the maximum amount you could?
Has your broker put it in an email?

Some lenders have their furlough stance in the FAQ Covid section on their website and recalculate the income / outgoings based on the new income and as long as it still fits with affordability there's no issues with lending.

donkeyk22

In answer to your questions-
1. Santander.
2. I don't believe we are the maximum, but we didn't ask for more than we had approved so can't really say for definite. We have left over savings so our deposit could increase if the lend reduced.
3. I have the broker's response in writing: "As you have a mortgage offer now [WIFE'S NAME] furlough will not change this."

MovingForwards

1. I can't see anything on their website about this situation.

2. If it's about 3.5x your joint salary, that's probably the maximum you could borrow. 

3. Where did you find this broker?

Hopefully one of the resident brokers will see your post and know what Santander's position is.

Windofchange

Sounds to me as though this would fit under the you must inform us of any material change to your situation clause that mortgage offers have - i.e. your wife is now not earning what she was, and therefore you have a duty to inform the mortgage company. I'm not an expert or a broker by any stretch, and I guess if your broker doesn't seem interested then that is a good sign, but it seems to me as a layman a bit of a grey area. As above, one of the brokers on here will be along shortly I'm sure. 

Windofchange

And here it is, about halfway down the Santander Intermediaries page:

My client's new Santander mortgage application has not yet completed but they've made me aware that their income is reducing as a result of coronavirus. Do I need to notify you?

We should be notified of any change in circumstances. Any supporting documentation will be requested, where required, to ensure the application remains acceptable to us in line with our current mortgage lending policy.

https://www.santanderforintermediaries.co.uk/help-and-register/coronavirus-covid-19/

Grabs39

I’m in a similar boat - we got our Mortgage offer in March and should have been exchanging soon. I was put on furlough on Thursday, effective today.   I’ll be speaking to our mortgage advisor tomorrow.  Fingers crossed!

SimonBck

I have been given a temporary reduction but not furloughed. We are close to our maximum borrowing. Will also be talking to our broker tomorrow. 

donkeyk22

Ok I need to speak to the broker tomorrow. I'm hoping that they (the broker) have been given guidance that if the only change is an applicant has been furloughed on the government scheme the lender doesn't conisder it a material change, and they only need to be notified if the income has substantively changed (e.g. self-employed, reduced hours, etc.) This seems at least plausible, as if they do consider a furlough a material change they are going to be re-reviewing an awful lot of recent applications and, given the number of payment holiday requests they'll also be having to review and process, I'm hoping they've seen the wood for the trees. Either that, or it's a convenient way of getting out of the lend...

The annoying thing is that a substantial piece of our outgoings was on childcare, and as the nursery is currently closed (and is one of the few that isn't still insisting on payment of fees during their closure) our net income position in the immediate short-term has has actually improved, not worsened, even with the furlough considered!

davidmcn

I would consider a 20% drop in income for an indefinite period to be a material change.

SimonBck

donkeyk22 said:

Ok I need to speak to the broker tomorrow. I'm hoping that they (the broker) have been given guidance that if the only change is an applicant has been furloughed on the government scheme the lender doesn't conisder it a material change, and they only need to be notified if the income has substantively changed (e.g. self-employed, reduced hours, etc.) This seems at least plausible, as if they do consider a furlough a material change they are going to be re-reviewing an awful lot of recent applications and, given the number of payment holiday requests they'll also be having to review and process, I'm hoping they've seen the wood for the trees. Either that, or it's a convenient way of getting out of the lend...

The annoying thing is that a substantial piece of our outgoings was on childcare, and as the nursery is currently closed (and is one of the few that isn't still insisting on payment of fees during their closure) our net income position in the immediate short-term has has actually improved, not worsened, even with the furlough considered!

Totally agree with you. There must be many cases like this.
I will be going back to full pay, to miss out on the house we are buying for the sake of a temporary change would be upsetting.