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?
I have just been told my company is making me redundant – do I tell my mortgage lender?
Sam Harhat of Andrews Property Group replies: Many other people, without a doubt, are in a similar position to you right now.
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.
Sam Harhat of Andrews Property Group
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 home ownership that are typically the most expensive as you renovate and buy new furniture.
You could be committing fraud by not coming clean
When you applied for your mortgage your lender will have asked you about your job, including bank statements looking at your monthly income and outgoings, and whether you were at risk of redundancy.
If your job was on shaky ground at the time but you lied about it to get your application through, then your lender could view the application as fraudulent.
Only once you have fully completed on your property are you under no obligation to tell your lender if you lose your job.
Even in this scenario it’s still advisable to be completely honest with your lender as soon as possible as they may be able to give you some leeway on lower repayments to tide you through the worst.
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 home ownership 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 per cent 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.
Best mortgage rates and how to find them with This is Money’s help
This is Money has partnered with L&C Mortgages, a firm of independent mortgage brokers who specialise in finding the best mortgage rates and the right deal for you.
To check for the best mortgage deal and speak to an adviser, click here.
Or you can fill in your details online to find out the best mortgage rates for you.