Losing a job between exchange and completion of a house

ey143

What happens if a bank finds out that you have lost your job following the exchange of contracts on a house but before completion with respect to the mortgage offer?

What if you also have substantial savings to make the repayments for several years, can the bank still offer it?

What is the situation with respect to breaching the contract as a result of not being able to complete because of the change in circumstances - I guess you still forfeit your 10% deposit on the house? Does the vendor have the option to show discretionary and either wait or refund the money even though they are not legally required to do so?

Thx.

kingstreet

The lender can and probably will withdraw the offer.

The applicant would need to discuss with the lender, but I suspect that no affordability is the cornerstone of mortgage lending and the savings having a limited potential life, the answer will be negative.

The vendor has the right to the deposit and to bring a breach of contract claim (along with the rest of the chain) for damages.

ey143

Is insurance available for this sort of thing?

kingstreet

You could take out unemployment cover, but this is unlikely to make any difference to a lender's decision to withdraw the offer as such cover has a limited payment period, a similar situation to using savings.

ey143

Yes, have an redundancy cover now for the last 18-months which will pay out for 12-months. I haven't been notified of anything at work, but trying to change roles as I know changes will come. Just want to mitigate the risk in case the vendor asks for a long 1 month between exchange and completion.

Thanks for your comments.

JimmyTheWig

kingstreet wrote: »

You could take out unemployment cover, but this is unlikely to make any difference to a lender's decision to withdraw the offer as such cover has a limited payment period, a similar situation to using savings.

I think the OP meant can he get insurance so that the insurance company pays the 10% deposit (and other costs) that he would lose for having exchanged.

kingstreet

There is "fall-through" cover, but I'd be very surprised if it covered breach of contract and/or loss of deposit through job loss. The only one I know of limits the payout to £1,500, as it's only designed to cover out of pocket expenses.

fionajbanana

It happened to my dad in the around 94. Were supposed to exchange contracts on the Thursday and my dad heard of him being made redundant on the Tuesday. It was around Easter. The mortgage company pulled out due to the amount borrowed. I was only 12 at the time, and naive with house buying process.

My dad got another job within 10 weeks and we moved to another property which came up on the market later on in November. The buyer was very understandable and stayed put. Most buyers would have pulled out too. They sold their house and lived in one of their parents.

Remember having to unpack boxes and flattening them to put them in the loft - so if the move was sudden, we had packing materials at the ready. Didn't unpack boxes of ornaments and books.

Mr_Moo_2

Keep your exchange - completion time down to a week, and keep a low profile in the office. Or take a week off?

ey143

Yes, was referring to insurance to cover the risk of not completing.

I'm trying to keep exchange and completion to one week. Vendor wants 1 month. I have been honest and explained to him the risk of my job and that its in both our interests to complete quickly. Still taking his time!

ey143

Mr Moo - they can still make you redundant when away from the office
My staff mortgage offer is also with my employer...a bank!