Completing a mortgage application is an extremely important part of the house-buying process. For the vast majority of people who use a mortgage to purchase their property, it is essential that the offer does not fall through.
There are lots of different reasons why a mortgage lender may withdraw their offer. Fortunately, lots of these factors are in your control, and if you are completely honest on your application form, you will hopefully avoid this from ever happening.
But why would a lender withdraw a mortgage offer? And can they do so after the exchange of contracts? Read our blog below for a clear answer to these questions.
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 you have completed the mortgage application.
Why would a lender withdraw a mortgage offer?
When a lender offers you a mortgage, it is not legally binding – which means that they can withdraw the offer, if they wish. A lender will likely do this if there has been a change in circumstances which may affect your ability to repay the loan. Examples of this might include:
- A change in your income (e.g. losing your job)
- A guarantor passing away and being unable to find a replacement
- Someone you were buying the house with dropping out
Each mortgage lender has varying approaches to risk, and therefore 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Often when a mortgage offer is withdrawn, it will be pulled out of altogether, although in some cases the lender may simply increase the interest rate.
Finally, a mortgage lender may withdraw an offer if a regulator has removed or restricted their ability to lend. However, this circumstance is extremely rare – and also out of your control – so you should not worry about this.
How to ensure your lender doesn’t withdraw a mortgage offer
The most important way to ensure your lender doesn’t withdraw a mortgage offer is by safeguarding your financial situation. If your 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. Otherwise, the lender will view you as a liability and withdraw the offer.
Throughout your mortgage application, it is essential that you are honest about all the information that you provide. If you lie on the application form, and it is discovered, then it will almost certainly result in the mortgage offer being withdrawn.
Mortgage lenders can withdraw an offer if they suspect that you are involved in criminal or fraudulent activity. You should therefore avoid this at all costs.
Finally, it is recommended that you 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 you pull out of a house purchase after the exchange of contracts, there is no way for you to reclaim the costs from your mortgage lender. Likewise, if a mortgage lender withdraws an offer, there is often no way for you to recover the costs because you have breached one or more of the conditions involved in the initial offer. You will therefore be responsible for conveyancer fees, survey fees and mortgage broker fees.
It is technically possible for a lender to withdraw an offer on completion day, however this is extremely rare. The lender should have completed its checks before this day, however there have been occasions when an error/red flag has been revealed on completion day itself.
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