For most people using a mortgage to purchase a property, it is essential that the offer does not fall through.
There are many reasons why a mortgage offer may be withdrawn.
Fortunately, many of these are within your control.
But some of them are not…
But why would a lender withdraw a mortgage offer? Can they do so after the exchange of contracts?
Read on to find out the answers to these questions, and more.
How long does a mortgage offer usually last?
The average mortgage offer in the UK will be valid for between 3 – 6 months.
This offer will come through (often by a letter) after a mortgage application has been completed.
Reasons for lenders to withdraw mortgage offers
When a lender offers a potential buyer a mortgage, it is not legally binding. This means that they can withdraw the offer if they wish to do so.
A lender will likely do this if there has been a change in circumstances which may affect the buyer’s ability to repay the loan.
Examples of this might include:
1. A change in the buyer’s income
This could mean the buyer has lost their job or has changed to a different role or job with a lower salary. Both situations may negatively impact a lenders’ calculations on a buyers’ ability to pay back a mortgage.
Lenders assess mortgage applications based on their data and judgement on a borrower’s ability to repay a loan. If there’s a significant change in the buyer’s income, such as job loss or a decrease in salary, the lender will likely withdraw of change the offer.
2. A guarantor withdrawing
A guarantor is someone who agrees to take responsibility for the mortgage if the buyer defaults. If the guarantor decides to withdraw, it will likely create uncertainty and risk for the lender.
Finding a replacement guarantor might not always be feasible. But without one, the lender will likely view the risk differently and could withdraw the mortgage offer.
3. Co-buyer dropping out
Many buyers buy properties with other people – spouses, siblings, or even shared ownership with friends. This could be under a joint tenants or tenants in common agreement.
A lending offer that was made to buyers (plural) might not stand for a buyer (singular).
The lender may reassess the offer based on the remaining buyer’s financial situation and creditworthiness. This could result in the lender withdrawing the offer or adjusting the terms of the mortgage.
4. Regulatory changes
Finally, a mortgage lender may withdraw an offer if a regulator – or new government policy – has removed or restricted their ability to lend.
However, this circumstance is extremely rare – and out of buyers’ control.
Each mortgage lender is different
Each mortgage lender has varying approaches to risk.
This means that a change in circumstances may be a dealbreaker for one mortgage lender, but not another.
Often, when a mortgage offer is withdrawn, it will be pulled out of altogether. However, in some cases the lender may simply increase the interest rate.
How to ensure your lender doesn’t withdraw a mortgage offer
If a mortgage offer has been made according to a particular salary, deposit, or number of people, then it is important that none of these factors change.
Throughout a mortgage application, it is essential that buyers are honest about all the information that they provide. If a lie on an application form is discovered, it will likely result in a mortgage offer being withdrawn.
(The same applies to sellers – buyers can seek compensation for any losses caused by lies.)
Mortgage lenders can also withdraw an offer if they suspect that a buyer is involved in fraudulent or criminal activity.
Finally, buyers’ should hire a solicitor or conveyancer who is efficient and an excellent communicator. This is because mortgage lenders can withdraw their offer if it is not completed by the deadline given at the beginning of the offer.
Can a lender withdraw a mortgage offer after exchange?
Yes, a mortgage lender can withdraw an offer after an exchange of contracts.
In fact, they can withdraw the offer at any point up until completion.
If a mortgage lender withdraws an offer, there is often no way for the borrower to recover the costs.
This is because they (the borrower) have usually breached one or more of the conditions involved in the initial offer. They will therefore be responsible for:
- Conveyancer fees
- Survey fees
- Mortgage broker fees
It is technically possible for a lender to withdraw an offer on completion day. However, this is extremely rare – unless an error/red flag is revealed on completion day itself.
After all, the lender should have completed its checks before this day.
What if a buyer pulls out of a house purchase after contract exchange?
If a buyer pulls out of a house purchase after the exchange of contracts, there is no way for them to reclaim the costs from their mortgage lender.
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