Remortgage After Redundancy

Your Immediate Options After Redundancy

When redundancy happens, your mortgage does not go away — but neither do your options. The right approach depends on your specific circumstances.

If you have found new employment: If you have already started a new job or have one lined up, remortgaging is very achievable. Lenders will assess your new income, and the redundancy becomes part of your recent history rather than a current barrier.

If you are actively job searching: While you are between jobs, a full remortgage with a new lender is difficult because you cannot demonstrate current income. However, there are still options, including product transfers with your existing lender and communicating with them about your situation.

If you received a redundancy payment: A lump sum redundancy payment does not count as ongoing income for mortgage purposes, but it can be used to reduce your mortgage balance, cover payments while you find new work, or boost your deposit for a remortgage once you are re-employed.

If your current deal is ending: This is where urgency matters. Moving to your lender's SVR while unemployed adds significant cost at the worst possible time. Exploring a product transfer before your deal expires can help keep costs under control.

The most important thing is to act early. Contact your mortgage lender as soon as redundancy happens or looks likely. Lenders have a duty to treat you fairly and may offer forbearance options to help you through the transition.

Talking to Your Lender

One of the most important steps after redundancy is to speak with your existing mortgage lender. This conversation can feel daunting, but lenders are required by the FCA to treat customers in financial difficulty sympathetically and constructively.

Options your lender may be able to offer include:

• Payment holiday: A temporary break from mortgage payments, typically lasting one to six months. Interest continues to accrue during this period, so your balance will increase, but it can provide breathing room while you find new work.
• Reduced payments: Temporarily switching to interest-only payments reduces your monthly outgoing while keeping the mortgage current. This is less costly than a full payment holiday.
• Term extension: Extending the length of your mortgage reduces the monthly payment amount, making it more manageable on a reduced income.
• Product transfer: If your current deal is ending, your lender may offer a product transfer to a new rate without requiring a full income reassessment. This can prevent you from moving to the expensive SVR.

When you contact your lender, be honest about your situation. Explain that you have been made redundant, whether you have a redundancy payment, and what your plans are for re-employment. The more information you provide, the better they can assess how to help.

Keep a record of all conversations, including the date, who you spoke to, and what was discussed. This is important in case you need to escalate any issues later.

Using Your Redundancy Payment Wisely

If you received a redundancy payment, how you use it can significantly affect your mortgage position going forward.

Paying off mortgage arrears: If you have fallen behind on payments, bringing your account up to date should be a priority. Arrears can escalate quickly and affect your credit record and future borrowing options.

Creating a payment buffer: Setting aside enough to cover your mortgage payments for several months gives you time to find new employment without the immediate pressure of missed payments. This also protects your credit score.

Reducing your mortgage balance: Making a lump sum overpayment reduces your outstanding balance and your loan-to-value ratio. This could give you access to better remortgage rates once you are re-employed. Check for any overpayment limits or charges first.

Paying off other debts: If you have high-interest debts such as credit cards or personal loans, paying these off reduces your monthly commitments and improves your affordability when you next apply for a mortgage.

Keeping a general reserve: Living costs continue regardless of your employment status. Having a financial cushion reduces stress and allows you to be more selective about the job you take next.

The tax treatment of redundancy payments can be complex. The first £30,000 of statutory redundancy pay is normally tax-free, but elements such as pay in lieu of notice and holiday pay are taxable. If your redundancy package is substantial, consider speaking with a financial adviser about the most effective way to use the funds.

Remortgaging Once You Are Re-Employed

Once you have found new employment, remortgaging becomes much more straightforward. However, there are some considerations specific to your situation.

Probation period: If you are in the probationary period of your new job, some lenders may be more cautious. However, many lenders will assess you on your contracted salary regardless of probation status. An adviser can direct you to the most suitable lenders.

Income level: If your new job pays a different amount to your previous role, the lender will assess your current salary. A pay rise is helpful; a pay cut means your borrowing capacity may be lower.

Credit history: If redundancy led to any missed payments or financial difficulties, these will show on your credit file. Some lenders are more flexible about recent credit issues than others, particularly if you can explain the circumstances.

Employment gaps: Lenders may ask about gaps in your employment history. A straightforward explanation of redundancy followed by a period of job searching is easily understood and should not be a problem.

Redundancy payment as deposit boost: If you used part of your redundancy payment to reduce your mortgage balance, you now have a better LTV ratio, which could give you access to more competitive rates.

The sooner you can remortgage after starting new employment, the sooner you can lock in a competitive rate and stabilise your financial situation. An adviser can help you determine the optimal timing based on your specific circumstances.

Protecting Your Credit Score During Redundancy

Your credit score is one of the most important factors in your future mortgage options. Protecting it during redundancy should be a priority.

Prioritise essential payments. Mortgage, rent, council tax and utility bills should be paid first. These have the most serious consequences if they go into arrears.

Communicate with creditors early. If you anticipate difficulty paying any bills, contact the creditor before you miss a payment. Many will offer temporary reduced payments, payment holidays or other forbearance. Arranged forbearance is much less damaging to your credit score than unexpected missed payments.

Use savings strategically. If you have savings or a redundancy payment, use them to maintain essential payments while you find new work. Protecting your credit record now saves you money on interest rates for years to come.

Avoid unnecessary new credit. Taking on new credit during unemployment — even if offered — can look desperate to future lenders and adds to your financial commitments at a difficult time.

Check your credit report. Monitor your credit file regularly to ensure accuracy. If any errors appear, dispute them promptly. Free credit monitoring services are available from all major credit reference agencies.

A clean credit record after redundancy puts you in the strongest possible position when you are ready to remortgage with a new job.

Support and Resources Available to You

If you are struggling with your mortgage after redundancy, there are several sources of support available.

Your mortgage lender: Contact them directly to discuss forbearance options. They have a regulatory duty to help.

Support for Mortgage Interest (SMI): If you are claiming certain means-tested benefits, you may be eligible for SMI, which is a government loan to help cover your mortgage interest payments. It does not cover the full mortgage payment, but it can help bridge the gap.

Citizens Advice: Free, confidential advice on debt, benefits and employment issues. They can help you understand your entitlements and negotiate with creditors.

StepChange: A free debt charity that provides expert advice on managing debt, including mortgage arrears. They can create a debt management plan if needed.

National Debtline: Free debt advice by phone and online, with self-help tools and fact sheets covering mortgage arrears and unemployment.

Jobcentre Plus: Help with job searching, training and benefits claims to support your return to employment as quickly as possible.

Mortgage payment protection insurance: If you have MPPI, check whether redundancy is covered. Many policies include unemployment cover, though there may be a waiting period before payments begin.

You are not alone in this situation, and there are people and organisations ready to help. Reaching out early gives you the best chance of managing the transition smoothly and protecting your home.