Mortgage Offer Confusion

jls85

Hi all,

I am hoping someone can help me - I am currently waiting for a call back from my broker, but I'd like to understand a bit more about this before I speak to her.

Basically, I have just had my mortgage offer through for a new build house that is due to be completed in May/June time. I have applied for a 2 year fixed deal at 2.54%, but the offer states that this rate will run out in December 2016 (so 2 years from now rather than the completion date). I asked my broker to confirm that this date would be amended to fit with the date I move in, thus ensuring I get the full 2 years, and she said no - the product end date is December 2016 and after that I will need to move to a variable rate.

So effectively this means if I don't move in until May/June, then I will only get 18/19 months at the fixed rate which is not what I applied for. It also means I won't be able to re-mortgage for another 6 months without incurring fees, so I will be stuck on a variable rate for that time.

My broker said she is going to call Leeds to double check, but I'd like to know if this is standard practice or not? It seems unfair that I am forced to apply for a mortgage now by the developer, which then means I will miss out on the first 6 months of my fixed rate. Any advice hugely appreciated!

mrginge

If your fixed rate ends in dec 16 your erc will surely end then too.

I'm afraid if you apply for a fixed rate today then you are effectively booking that finance from today, with the expiry date assigned to that tranche of funding. Your actual date of drawdown isn't relevant and you don't get to pick when the two years starts or ends.

Thrugelmir

jls85 wrote: »

It seems unfair that I am forced to apply for a mortgage now by the developer, which then means I will miss out on the first 6 months of my fixed rate. Any advice hugely appreciated!

The choice of product is yours. The product you selected has a definitive expiry date of December 2016.

kingstreet

Get a fixed rate from a lender for a number of years from completion, rather than with a fixed end-date?

Alt

I would have expected a good broker to have advised you of this before submitting the application....

Alt

kingstreet

It's on every KFI issued. See section 4.

For example, when we get an enquiry, we issue a KFI which shows the example product, with its end date.

When we go out to see the client, we provide the recommended product KFI which again shows the end date.

Then, we produce and issue our suitability letter which again confirms the product and end date.

The lender produces a KFI with the end date and sends it to the applicant and finally the mortgage offer confirms the end date in the product details.

As I said, if you want a product which runs from completion for a number of years, you have to choose products from a lender which offers them.

OP - if your product has a fixed end date, so does any ERP. If there was to be any "overhang" it would appear in section ten of the KFI/offer.

amnblog

Alt wrote: »

I would have expected a good broker to have advised you of this before submitting the application....

Alt

There may be a particular reason why this particular lender is suitable for the client - it is unfair to criticise the broker without the full facts.

amnblog

JLS


Leeds do a number of 3 year fixed rates at up to 85% loan to value so you could opt for one of those to get 30 months or so of stability after completion.

jls85

At no point did anyone tell me that the 2 year fix would start right away, and I specifically asked my adviser when I got the KFI. To be honest, I assumed that the date was just an example based on today's dates and I asked her to confirm that. Her exact response was 'yes don't worry, you'll get the 2 years at a fixed rate'. If I had known otherwise, then I would have asked them if they could suggest a different product.

It might seem obvious to those who understand how mortgages work, but to me it seems mad that they can offer a 2 year fixed deal, knowing full well that the mortgage won't complete for another 6 months, yet the fix period begins immediately. Is the only way to get around this to apply elsewhere? What happens if the build takes longer than 6 months? Would refreshing the offer mean the fixed rate term is also re-set?

Alt

amnblog wrote: »

There may be a particular reason why this particular lender is suitable for the client - it is unfair to criticise the broker without the full facts.

Agreed, but I still think this is something that an advisor should clearly point out specially in a case like OP where the mortgage completion date is known to be so far in the future that it would reduce the term of the deal significantly.

Alt

besti

If you don't like the 2 year fixed, don't take it. Leeds won't change the end date.