You’ve found your dream home, applied for a mortgage and finally had that mortgage offer come through the post. Although you’re nearing the end of the buying process, there are still a few more steps to go. Avoid problems that could see your house offer fall through by finding out what happens after a mortgage offer is issued.
Quick Overview
After your mortgage offer has been issued by your lender you will need to review it carefully, before accepting it. If you need more time, you might be able to extend how long the offer is valid for. Then you are ready to exchange contracts and complete on your new property.
What is a Mortgage Offer?
A mortgage offer is a formal offer that you’ll receive from your mortgage provider. It should confirm that they are happy to give you a mortgage and how much they are willing to lend you. They will have completed all their background checks on you, including:
- Credit history
- Proof of identity
- Employment and earnings
- Income and outgoings
You and your solicitor will both receive copies of the offer and so will your mortgage broker, if you are using one. The details of the offer should include how much the mortgage provider is willing to lend you, the interest rate and any fees that are added to the loan.
What is the Difference Between a Mortgage in Principle and a Mortgage Offer?
A mortgage in principle is not a formal mortgage offer. It is a guide to how much money the lender thinks they can provide you with based on the information you’ve given them. Mortgages in principle usually give you an accurate idea about how much you can borrow. But it depends on the value of the property and whether you’ve given the lender accurate information about yourself. This is why it’s important to be honest on your application form.
By contrast, a mortgage offer is a formal offer. This is unlikely to be withdrawn because the company will have completed background checks on you and a valuation of the property. They know how much they are willing to lend you and all you have to do is accept the offer.
What Happens Next?
You are well on your way to becoming the owner of your new property. But there are a few more milestones (and legal processes) to complete before you can pick up the keys. It’s important not to get carried away and make sure that you follow all the procedures properly. Otherwise, your purchase might fall through. Here is what happens next:
Check Your Mortgage Offer
Check and double-check your mortgage offer to make sure you’re happy with it. A mortgage is a legally binding contract so if you didn’t get offered the amount of money you were hoping for, it may be worth taking a day or two to think it over.
You should pay close attention to the terms of the mortgage, which will tell you:
- How much the provider can lend you
- Monthly repayment costs
- Your interest rate and whether this is fixed or variable
- Your mortgage term (how long it runs for)
- Extra fees attached to the mortgage
- Any early repayment charges
If you have any questions you should contact your mortgage provider directly. You can also ask your solicitor for advice if you want any help deciding whether to accept the mortgage, especially if the money is less than the amount you need to purchase the property.
How Long is a Mortgage Offer Valid for?
The offer for your mortgage won’t be indefinite. Information on when it is due to expire should be in the offer letter. The lender will always want to give you enough time to think it over, but they have to mitigate risk. If they give you an open offer, you may accept it once your financial circumstances have changed, much later down the line.
Extending your Mortgage Offer
You may be able to extend your mortgage offer under some circumstances. For example, if construction is delayed on your new-build property, you may be granted an extension of six months. It’s worth speaking to your mortgage provider to see what they can do for you. Make sure you give them ample notice because it’s highly unlikely that they’ll extend it if you ask them right before the deadline.
In some cases, you might be refused an extension. If this happens and you miss the deadline, unfortunately, you will have to apply for a mortgage all over again. Any fees you have incurred for the property valuation and administration will still need to be paid.
If Your Mortgage Offer Is Withdrawn
It is highly unlikely that your mortgage offer will be withdrawn because the lender will have gathered all the information they need before making the offer. However, unforeseen life events do happen. Your mortgage offer may be withdrawn if you lose your job, suffer from a long-term illness that leaves you unable to work, or even if the property loses value.
Accept Your Mortgage Offer
Once you have checked your mortgage offer thoroughly and made sure you are happy, it is time to accept it. Your solicitor or conveyancer will tell you if there is anything that you need to do before signing off on the offer and returning the paperwork to your mortgage lender. Traditionally this is completed via post. Nowadays many lenders have secure procedures in place for you to sign online.
What if I Want to Decline My Mortgage Offer?
You are completely within your right to decline your mortgage offer. People do this for a variety of reasons, such as the amount of money not being enough for you to purchase the property. This might be the case if you bid very highly in order to secure it and have a low deposit. You also may have changed your mind about buying the property because some problems came to light when you got it surveyed. Since the mortgage is offered for a specific property, it will fall through under these circumstances.
Remember: You will still have to pay any fees you have incurred if you decline your mortgage offer. This could include administrative and property valuation charges.
Conveyancing
Now that you have accepted your mortgage offer it is time to transfer legal ownership of the property to you. The name of this process is ‘conveyancing’ and it is there to protect all parties during a property sale. It is complicated, but you will have a solicitor or licensed conveyancer to handle it for you.
It is worth mentioning that there is a fee attached to conveyancing of up to £1,500 and sometimes more, for unforeseen complications. If you are worried about being able to afford this, your mortgage lender might be able to add the fees onto your mortgage in exchange for appointing a conveyancer for you.
If you live in Scotland, this process is different. Your solicitor will exchange a series of letters with the seller’s solicitor, known as ‘missives.’ The deal becomes legally binding once these are concluded.
Exchange Contracts
As soon as both you and the seller are happy with everything and conveyancing has been completed, you can exchange contracts. Your solicitor or conveyancer will handle this process; it is essentially a formal exchange of the housing contract from the seller to you. There are quite a lot of steps, which is why it is important for somebody with legal expertise to handle it. Otherwise, the process could go wrong.
Since this can take some time it might be worth setting up regular checkpoints with your solicitor to get updates on how the exchange is going. This can prevent you from feeling worried, or out of the loop. It also ensures that you’ll have to most recent information because it is important to keep yourself well-informed on a major and time-consuming purchase like this.
Completion
The contracts have been exchanged, so it is finally time to complete on your new home. Completion is when the sale has fully gone through. Usually, it will take about 2 months from accepting your mortgage application to completion, but this can be longer (or shorter) depending on whether complications crop up. Hopefully, the wait was worth it because you now have official ownership.
Final Thoughts
Your mortgage offer may feel like the end of the house-buying process, but there are actually a few steps afterward. It is important that you review your mortgage offer carefully before accepting it because it is a legally binding contract and property is a serious purchase. Once you have accepted you will need to engage a solicitor or licensed conveyancer to manage the legal processes of exchanging ownership. This includes changing contracts and completing. Then you can finally pick up the keys to your new home.
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