Once you’ve exchanged contracts with the seller after making a house purchase, it certainly feels like you’re on the last stretch towards buying your new home.
However, while it may sound like your worst nightmare, there are rare cases in which mortgage lenders have been known to withdraw offers after this exchange has taken place but before completion.
Why would they withdraw an offer this late?
In some cases, a mortgage offer may be withdrawn after exchange of contracts if the lender reassesses your finances and decides against lending to you. This is an incredibly rare situation, as they should have carried out all the relevant checks beforehand, but there is the odd case where something has been missed upon the first look.
Should your planned lender discover any information surrounding your financial situation that’s even remotely suspicious – such as fraudulent paperwork, doctored payslips or falsified information about your income and outgoings – they could easily withdraw your application at the last minute. This is why it’s vital that you never lie on your mortgage application, as it will most likely catch up with you and can result in devastating consequences, potentially costing you thousands and making other lenders reluctant to consider any future applications you make.
Another – albeit less dramatic – reason for your offer being withdrawn is if your house purchase takes place many months after you receive your mortgage offer, and the offer actually expires. The best way to avoid this is to mark the date of expiry in your calendar, and if it’s approaching, get in touch with your planned mortgage lender and see if they can extend it or try to renegotiate an offer.
What if my offer is withdrawn?
If you find yourself with no mortgage after you’ve exchanged contracts, you should try and find a new mortgage as soon as possible. It’s best to get in touch with a mortgage adviser or broker to review your options and see if there are any suitable alternatives.
Without a mortgage, the sale may fall through, and you also risk losing the deposit given to your solicitor. If your mortgage offer is withdrawn after the contracts are exchanged and you have to back out of the agreement, it’s almost certain you will lose the 5-10% of the asking price you typically pay to secure the deal. This is because you’re usually locked into making the house purchase once the contracts are exchanged, and your forfeit for exiting the deal is to lose this money.
If you’re looking for a new mortgage, you may have more success with a mortgage provider offering a higher interest rate, although this is not guaranteed as ultimately it depends on the reasons why your offer was declined. If it was down to fraudulent behaviour or lying on your part, it’s unlikely you’ll be able to find a provider willing to lend to you. But, if your offer was withdrawn because the lender reassessed your finances and they didn’t match up with their lending policy, you may be able to find another lender that is happy to give you a mortgage.
Remember, it’s incredibly rare for a lender to withdraw your mortgage application at such a late stage if you have been true with them from the beginning. If it does happen, it’s important to keep your cool and try to take hold of the situation as soon as you can. The quicker you act to find a new mortgage deal, the better.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.