Mortgage offer pulled 3 days before completion

TBagpuss

Troy_af said:.

This is the one thing that I really don’t understand when it comes to house buying. I don’t see how it acceptable for a buyer to be put in a situation where they can lose their deposit and possibly made bankrupt, even have their lives absolutely ruined, due to a lender pulling an offer after exchange of contracts.

This seems totally corrupt to me. Why doesn’t the lender carry out all of their ‘final checks’ before exchange, not before completion. Or at the very least, there should be a clause in the contracts which states that the buyer is only able to purchase the property if and only if they have a valid mortgage offer in place. If they no longer have a mortgage offer, how can they possibly be expected to still proceed?

If the offer is pulled before completion then I really don’t understand how the buyer is expected by law to still be committed to the purchase. It is my biggest fear when house buying. I know it doesn’t happen often but that is not the point.

Yes, I agree house buying comes with risks. But this should not be one if those risks. 

Who do you think ought to bear the risk? If you arre anxious about it you can of course aim to exchange and complete on the same day so there is no gap in which the lender might pull the offer.

It's pretty well known that lenders may do late checks, if you are conerned, you can reduce the risk by keeping the gap between exchange and completion short, by making sure that you don't take on extra credit after you get your offer in place (or speak to your broker / lender if you need to take on other credit to check whether it affects the offer - better to have the offer withdrawn or amended before you exchange becasueyou've raised the issue and they have done a fresh review or check at that point, than later) 

But an offer is withdrawn typically becaue the (potential) borrower is no longer seen as a good risk, if the lender bore that risk it would mean higher rates for everyone, if the buyer didn't risk losing their deposit then whoever they were buying from would be left carrying the cost of their change in circumstances or poor choices. 

theartfullodger

Lender CAN tell OP why the change, they just choose not to 

Gavin83

pinkteapot said:

First thing to do is find out if your broker can get you a new mortgage. If so, approach the developer and beg for an extension to completion while your application goes through.

I see no incentive for the developer to agree to this. This way they get to keep the exchange deposit from the OP and sell the house to someone else, so they'll make an extra £22.5K profit on this sale. It's certainly worth asking mind but I expect the answer will be no.

Bit late for the OP now but it's a terrible idea to do anything that'll make changes to your credit record before completion. I wouldn't even arrange for broadband before completion as it involved a hard search and I have a great credit record and was well within their affordability range. It's also not a good idea to push yourself to the absolute limits of affordability either.

seradane

user1977 said:

Troy_af said:

user1977 said:

Flugelhorn said:

sometimes there can be a significant gap between exchange and completion with new properties, is there anything written into contracts these days about people not being able to go through with it owing to financial problems, redundancy etc ?

No. The expectation is that the buyer is in control of their own financial circumstances and needs to bear the risk. From the vendor's point of view, it would be a bit too easy for a buyer to engineer a situation where they don't have a mortgage offer by the completion date, enabling them to walk away.

This is the one thing that I really don’t understand when it comes to house buying. I don’t see how it acceptable for a buyer to be put in a situation where they can lose their deposit and possibly made bankrupt, even have their lives absolutely ruined, due to a lender pulling an offer after exchange of contracts.

This seems totally corrupt to me. Why doesn’t the lender carry out all of their ‘final checks’ before exchange, not before completion.

Because there could be a lengthy period between exchange and completion - are you saying the lender ought to take the risk of, say, the borrower taking out a bunch of additional borrowing which they hadn't declared in their application? Or starting to default on their other loans? Lenders aren't in the habit of withdrawing mortgage offers on a whim

But then on the flip side there's nothing stopping the borrower from taking out a bunch of additional borrowing the day after completion, when the lender doesn't get a say anymore. The borrower's risk of defaulting would be equally as high, yet they can't pull the mortgage at that point.

I get they're trying to minimise their own risk, but it seems a fairly harsh approach given a buyer's circumstances can change unexpectedly at any point (redundancy, illness, etc etc) but because it happened in this particular period of time as opposed to the previous or next given period, the buyer has to forfeit tens of thousands of pounds of deposit?

macman

Why would there be over 8 weeks gap between exchange and completion on a new build?  There's no chain, so why would it not be a maximum of one month, or even same day?

p00hsticks

Gavin83 said:

pinkteapot said:

First thing to do is find out if your broker can get you a new mortgage. If so, approach the developer and beg for an extension to completion while your application goes through.

I see no incentive for the developer to agree to this. This way they get to keep the exchange deposit from the OP and sell the house to someone else, so they'll make an extra £22.5K profit on this sale. It's certainly worth asking mind but I expect the answer will be no.

Surely it depends on how confident the developer is that they'll be able to re-sell it quickly at the same price ?

Round here we have a new estate being built and each week they seem to be offering more and more incentives to try to get them off their hands (e,g a years mortage paid, all flooring / carpeting included etc...)

kingstreet

macman said:

Why would there be over 8 weeks gap between exchange and completion on a new build?  There's no chain, so why would it not be a maximum of one month, or even same day?

A developer is looking for the certainty of a sale before it fits-out the new property to the purchaser's spec. When a sale falls-through it's difficult to sell again where the kitchen and bathroom are already installed. Hence the usual lower price.

user1977

macman said:

Why would there be over 8 weeks gap between exchange and completion on a new build?

Pretty commonplace - they're normally released for sale long before they're built. Developer will prefer to have the certainty of sales signed up before they start spending money.

[Deleted User]

@MARY640 how are you getting on now, let us know how this progressed please.

Flugelhorn

macman said:

Why would there be over 8 weeks gap between exchange and completion on a new build?  There's no chain, so why would it not be a maximum of one month, or even same day?

happens with new builds  - they push for exchange and then complete on notice