Remortgage While on Sick Pay

How Sick Pay Affects Your Remortgage Application

When you apply to remortgage, lenders assess your income to determine whether you can afford the repayments. If you are on sick pay, your income may be lower than usual, which can affect this assessment.

The impact depends on the type of sick pay you are receiving:

Full occupational sick pay: If your employer continues to pay your full salary during illness, this is treated the same as regular employment income. Many lenders will proceed as normal in this situation.

Reduced occupational sick pay: Some employers pay a percentage of salary during illness, such as half pay. Lenders may assess you on this reduced figure or consider your return-to-full-pay date, depending on their policy.

Statutory Sick Pay (SSP): SSP is significantly lower than most salaries, which can substantially reduce the amount you are able to borrow. Lenders who assess on current income may offer less favourable terms.

No pay: If you have exhausted your sick pay entitlement and are receiving no pay from your employer, lenders will need to see alternative income sources or evidence of your return-to-work date.

The critical factor for most lenders is whether your illness is temporary or long-term, and whether you have a clear return-to-work plan. A short-term absence with a confirmed return date is viewed very differently from an open-ended period of illness.

What Lenders Want to See

Lenders assessing an application from someone on sick pay will typically want evidence that addresses their key concerns about income stability.

A return-to-work letter: The most valuable document you can provide is a letter from your employer or GP confirming when you expect to return to work. This reassures the lender that your income will return to normal levels.

Your employment contract: This shows your substantive salary and employment terms, demonstrating what you will earn when you are back at work.

Payslips: Lenders will want to see recent payslips, which may show your sick pay. They may also want to see payslips from before your illness to understand your normal earnings.

Bank statements: These show your overall financial position, including how you are managing your commitments during the period of reduced income.

Evidence of sick pay entitlement: Information about how long your occupational sick pay continues and at what level can help lenders understand your income trajectory.

Some lenders will also want to understand the nature of your illness, though this is about assessing likely income recovery rather than making health judgments. You are not obliged to share detailed medical information, but being transparent about your expected recovery timeline helps.

An experienced mortgage adviser can help you assemble the right documentation and present your case to lenders who are most likely to take a positive view of your circumstances.

Timing Your Remortgage Application

When you apply can significantly affect the outcome. Here are some timing considerations if you are on sick pay.

If you are close to returning to work: Applying just before or shortly after your return can be ideal. Your payslips will soon show your full salary again, and lenders have confidence in your income stability.

If you are on full sick pay: There may be no advantage in waiting, as your income is the same as your normal salary. Apply when it makes financial sense based on your current mortgage deal timing.

If you are about to drop to reduced or statutory sick pay: Applying while you are still on full pay may be preferable, as it gives you a stronger income position for the assessment.

If your current mortgage deal is ending: The cost of reverting to your lender's SVR could be hundreds of pounds per month more than a competitive fixed rate. In this case, acting promptly is important even if you are on sick pay, as the cost of delay can be significant.

Remember that the remortgage process typically takes four to eight weeks from application to completion. Factor this timeline into your planning, especially if your sick pay level is about to change or your current deal is ending on a specific date.

A product transfer with your existing lender may also be worth considering if timing is tight, as these often complete more quickly and may not require a full income reassessment.

Product Transfer as an Alternative

If a full remortgage feels too complicated while you are on sick pay, a product transfer with your existing lender could be a practical alternative.

Many lenders offer product transfers without conducting a full affordability assessment. This means your current sick pay situation may not be scrutinised as closely as it would for a new application with a different lender. Your existing lender knows your payment history and may simply offer you their available rates.

Advantages of a product transfer while on sick pay:

• Simpler process with less paperwork
• Often no affordability reassessment required
• Faster completion time
• No need for a new property valuation in many cases
• Less stressful during a period of illness

Potential disadvantages:

• Your current lender's rates may not be the most competitive
• You cannot release additional equity through a standard product transfer
• You miss the opportunity to restructure your mortgage (e.g., changing the term)

The right approach depends on the difference in rates between your current lender's product transfer and what is available on the wider market. If the gap is small, the convenience of a product transfer may outweigh the savings from switching. If the gap is substantial, a full remortgage with an accommodating lender could save you significantly more.

Income Protection and Insurance Considerations

If you are on sick pay, now is a good time to review any insurance policies you may have that could support your mortgage payments.

Income protection insurance: This pays a percentage of your income (typically 50-70%) if you are unable to work due to illness. If you have this cover and it has been triggered, the payments can be used as income evidence for a mortgage application with some lenders.

Mortgage payment protection insurance (MPPI): This specifically covers your mortgage repayments during periods of illness, unemployment or accident. Check your policy terms, as there may be waiting periods before payments begin and maximum claim periods.

Critical illness cover: If your illness qualifies under the terms of a critical illness policy, you may receive a lump sum that could be used to reduce your mortgage balance or cover payments during your recovery.

Employer benefits: Some employers offer group income protection or private medical insurance that could help you recover and return to work more quickly.

If you do not currently have income protection insurance, it is worth considering once you are back at work. While it adds to your monthly costs, it provides valuable security if illness strikes again in the future. The cost of premiums is often modest compared to the financial impact of losing your income for an extended period.

When reviewing your insurance options, make sure any existing policies are being utilised if you are eligible to claim. Money you are entitled to should be working for you during a difficult time.

Steps to Take Right Now

If you are on sick pay and thinking about remortgaging, here are the practical steps you can take today.

1. Check your current mortgage deal. Find out when your current rate expires and what your lender's SVR is. This tells you how urgent it is to act.

2. Understand your sick pay position. Check with your employer how long your current level of sick pay will continue and what it drops to afterwards. This helps with planning the timing of your application.

3. Get a return-to-work estimate. If possible, obtain a letter from your GP or employer indicating when you expect to return to work. This is the single most helpful document for your application.

4. Check your credit report. Make sure there are no errors or unexpected issues on your credit file. If sick pay has led to any late payments, address these if possible before applying.

5. Gather your financial documents. Collect payslips, bank statements, your employment contract, and any insurance policy details.

6. Speak with a mortgage adviser. A whole-of-market adviser who understands lending during illness can assess your options and recommend the best route forward — whether that is a product transfer, a full remortgage, or waiting until your circumstances change.

Taking these steps puts you in the strongest possible position, regardless of which direction you decide to go. Even if you conclude that now is not the right time to remortgage, understanding your options gives you confidence and control during an uncertain period.