You’ve applied for a mortgage and you’ve had an offer – hooray! But what happens next?
Well, the good news is the hardest bit is over.
The application process
Applying for a mortgage can be daunting – it will require you and the lender to work out what you can afford to borrow by going over your current income and expenditure in close detail. And there’s no guarantee you’ll be accepted.
You may have been asked whether you’re a member of a gym, how many children you have in nursery and how much you spend getting your haircut. You’ll have also had to provide payslips, and your credit history will have been examined in detail.
If your lender thinks you can’t afford your mortgage repayments, they’ll turn you down. And if they think your credit history shows that you’re an irresponsible borrower – or if you’ve never borrowed – they may also turn you down.
"Your application doesn’t end there."
The application doesn’t end there either. Next, the lender you applied to will have carried out a valuation survey to make sure that the amount you’ve offered to pay for the property matches – or is less than – what they think it’s worth.
If they think you’re paying too much, they may offer you a smaller mortgage or turn down your application altogether.
But, if the lender thinks you’re a responsible borrower who can afford the mortgage you’ve applied for, and that the property you’re buying is worth it, they’ll make you an offer. So, what happens next?
Once you’ve got your offer
The mortgage offer is often sent to both you and your solicitor or conveyancer so you can review it carefully. It will confirm how much the lender is willing to let you borrow, the length of time you’ll make repayments for and what these monthly repayments will be.
This is all based on the information the lender got from the valuation survey and the information you’ve provided them about your income and expenditure. If anything has changed that could affect your mortgage offer – perhaps you’ve lost your job – you should inform the lender.
And if there’s anything you’d like to change, you’ll also need to let the lender know now. For example, if you paid for your own property survey and it uncovered structural issues that mean you’ve now put in a lower offer, you’ll need to let the lender know so you can discuss this.
What if the offer is less than I need?
Unfortunately, it’s not unheard of for a mortgage valuation survey to flag up a serious issue with a property. When this happens, a lender may decide to lend you some of the money you need to borrow, but to hold back a portion of it until you have fixed the issue.
This is known as mortgage retention. It can cause real difficulties for buyers if you can’t afford to fix the issues using your own funds, and may even mean you have to walk away from the sale.
There may be a solution, though, like renegotiating with the seller. Learn more here.
I’ve accepted the offer – what next?
If the mortgage offer meets your needs, the next stage is to set a date for completion. This is something that your solicitor will do in agreement with the solicitor working on behalf of the person selling the home you’re buying.
"Completion is a legally binding agreement."
Once you exchange contracts, you will need to pay the deposit on the property and you’ll take over responsibility for the buildings insurance. You’ll then enter a legally binding agreement that you will go ahead with buying the property. If you don’t you could lose all your deposit money.
The last stage is completion. This can happen the same day as you exchange, but it usually takes between a week and a month.
On the day of completion, the lender will release the mortgage funds to your solicitor, who will send them to the seller’s solicitor. The house is then legally yours!
What if my mortgage offer runs out before I complete?
Once you receive your mortgage offer, this side of the property purchase should run smoothly. However, the rest of the sale may not be so plain sailing.
If the purchase drags on and on, perhaps because the seller hasn’t found somewhere to buy, there’s a risk your mortgage offer could run out. They don’t last forever and nor do the mortgage products lenders provide.
So if you’re yet to exchange and know your mortgage offer is nearing its expiration date, contact your lender as soon as possible and see if you can extend it. This is often possible. If it’s not, you will need to start the whole application process again.