You’ve spent so long looking for the perfect property and you’ve finally found your dream house.
You give the estate agent the offer you’re willing to make and hear back that the sellers accept – success!
But does this definitely mean that you’ll be able to buy, assuming your lender has agreed to your mortgage? If they decide to reassess your finances, will they be able to withdraw your mortgage offer even after you’ve exchanged contacts on properties? Let’s take a look at all of the facts and see how much this could cost you.
Lenders withdrawing mortgage
Once your mortgage offer has been made by your lender, you might assume that this means you’re definitely guaranteed the finance. But this isn’t necessarily true, as your lender is within its rights to reassess your application and decide that it’s not going to lend to you after all.
This may seem unfair but it’s all to do with the Mortgage Market Review (MMR). Since these rules came into place in 2014, lenders have to make certain affordability checks to ensure that potential borrowers aren’t taking out more credit than they can afford to repay.
It’s quite normal for lenders to credit check you more than once and it’s possible that something could show up the second time that wasn’t picked up the first time. This could mean that even though you’ve had a mortgage offer from your lender, they could decide to withdraw it if they think you won’t be able to afford the payments after all. You don’t need to panic though – this isn’t common.
What you can do
When you’ve had a mortgage offer, it’s a good idea not to take on any extra borrowing, so don’t apply for any loans, credit cards or finance plans before you’ve completed on the mortgage whilst the paperwork is still going through. This is because if your lender does decide to run a credit check on you again, they’ll be able to see this new application for credit on your credit report.
"It’s a good idea to check your credit report before you apply for a mortgage."
If they think that you’ve now got too many financial obligations and that this would impact on your ability to repay your mortgage, they may decide to withdraw your mortgage offer. Speak to your lender if you’re thinking about taking out another credit agreement while you’re still going through the mortgage offer process – they’ll be able to advise you whether or not it’s to affect you.
It’s also a good idea to check your credit report before you apply for a mortgage. You can do this through one of the three credit reference agencies – Experian, Equifax or CallCredit – or to find out how you could check your credit history for free, read our blog on Clearscore and Noddle.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.