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Can a mortgage offer be withdrawn after exchange of contracts?

16/10/2018

Most buyers think that when a mortgage offer is issued by the mortgage lender that it is guaranteed they will honour the lending facility. This is understandable considering the lengthy and exacting mortgage application process. The reality though is that the mortgage lender can withdraw their mortgage offer after exchange of contracts and all the way up until completion leaving you to bear the costs of failing to complete.

That said it is only on very rare and extreme occasions where this might happen and the mortgage lender explains what these circumstances are within their mortgage offer. We explain in this article why a mortgage offer might be withdrawn and what you can do if this happens.

How can a mortgage offer be withdrawn?

Source: Santander Uk Plc Mortgage Offer

We have offered you this mortgage based on the information that:

You (or your intermediary) told us in your mortgage application;
You authorised us to obtain about you; and
We have reasonably assumed about the property.

We may withdraw this offer if any of the following circumstances apply and, had we been aware of the true circumstances, we would not have provided the offer to you, or we would have provided an offer of a lower amount or on different terms:

There is a material change to the facts and circumstances relating to your loan application;
There has been a material change in your circumstances since you applied for the mortgage which is likely to have a material impact on your ability to afford the loan;
Where we have instructed a conveyancer they are unable to certify the title to the property in accordance with our instructions;
There is a change to the condition, value or title to the property or we revalue the property after the date of this offer and such change or the revaluation has a material impact on the suitability of the property as security for the loan;
We discover that you have intentionally provided us with false, inaccurate or incomplete information as part of your application for the loan or omitted information which we have requested from you as part of your application for the loan;
We reasonably suspect you are involved in any criminal or fraudulent activity or you are convicted of a serious criminal offence;
Completion of the offer does not take place by the deadline given at the beginning of this offer; or
We are no longer permitted to lend the money to you due to our regulator removing or restricting our permission to lend.

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Can you get compensation if the mortgage lender withdraws their mortgage offer?

As you can see in the article 'The costs of pulling out after exchange of contracts', the costs for failing to complete after exchange of contracts are considerable. None of these costs can be reclaimed from your mortgage lender if they withdraw the mortgage offer because you have breached one or more of the conditions involved.

Why would a mortgage offer be withdrawn...and what can you do about it?

Here are some reasons why your mortgage lender will withdraw your mortgage offer.

Mortgage offer expired - this is the most common situation where a mortgage offer can be withdrawn. As we saw above the mortgage offer states "Completion of the offer does not take place by the deadline given at the beginning of this offer". A mortgage offer normally expires after 6 months so if your conveyancing lasts longer than this you'll need to ask your solicitor to get an extension. You can normally extend by an additional month. After the extension most mortgage lenders require you to reapply for the mortgage offer under new terms.
Defect with the legal title - the solicitor acting for the mortgage lender completes a certificate of title where they confirm the below. If they are unable to confirm the below because something comes to light after you have exchange contracts then they will inform the mortgage lender and the mortgage lender may withdraw their offer. This would be uncommon because the solicitor should satisfied that the property title is appropriate for the mortgage lender prior to exchanging contracts.

Source: Metro Bank Plc Certificate of Title

"We have investigated the title to the Property, we are not aware of any other financial charges secured on the Property which will affect the Property after completion of the mortgage and, upon completion of the mortgage, both you and the mortgagor (whose identity has been checked in accordance with paragraph (1) above) will have a good and marketable title to the Property and to appurtenant rights free from prior mortgages or charges and from onerous encumbrances which title will be registered with absolute title."

Change of circumstances - loss of a job - where there is a long time between exchange and completion (like with new builds) you may have a change in your work circumstances such as being made redundant. Under the terms of the mortgage it states "There has been a material change in your circumstances since you applied for the mortgage which is likely to have a material impact on your ability to afford the loan". If this happens you must inform your mortgage lender of the change in your circumstances. The mortgage lender may withdraw the mortgage offer or reduce the loan amount they will offer you.
Your mortgage broker or you provided inaccurate information during your mortgage application - the mortgage lender states "We discover that you have intentionally provided us with false, inaccurate or incomplete information as part of your application for the loan or omitted information which we have requested from you as part of your application for the loan". Under such circumstances you should inform the mortgage lender of the reason for the inaccuracy and look to complete a new mortgage application with correct information.

Credit check between exchange and completion

Your mortgage lender completes a credit check when you initially apply to get your mortgage in principal and when they provide your mortgage offer. The mortgage lender doesn't complete another credit check after exchange.

Has your mortgage offer been withdrawn?

Our mortgage broker can help you with a new application if your mortgage offer has been withdrawn. Call us on 0333 344 3234 (local call charges apply). This work is not covered under our free consultation.