What is the mortgage offer?
A mortgage offer is a key step in your home buying process. At this point, the mortgage lender has given you a formal mortgage offer and has agreed to lend to you.
This is however not a guarantee as a mortgage offer may still be withdrawn or declined before you complete on your home.
A mortgage offer is given when a mortgage lender is confident that you meet the eligibility criteria for them to lend to you one of their mortgage products. A mortgage offer may also be referred to as an “offer of advance”.
The mortgage offer will usually be received by your conveyancer and it will state the role of the conveyancer in ensuring a smooth home purchase process. The conveyancer you appoint will in most occasions act on your behalf as well as the mortgage lenders behalf.
If you choose not to appoint a conveyancer the mortgage lender will usually appoint one and charge you for it as most residential mortgage lenders will not give a mortgage offer to someone who intends to act as their conveyancer during the mortgage process.
How long does a mortgage offer last?
A typical mortgage offer may last between 3 and 6 months but there are mortgage lenders who may be willing to offer you up to 12 months to account for things such as buying a new build off plan.
If your mortgage offer expires before you complete on your home purchase you will, unfortunately, have to reapply again for your mortgage.
If you anticipate any delay in completing on your home purchase you should convey this to your mortgage broker so they can advise on suitable solutions.
The mortgage lenders instructions when you get a mortgage offer:
As stated above, when you get a mortgage offer the mortgage lender will also provide a mortgage offer to the conveyancer and it may also provide one to your mortgage broker(if you have one).
These letters will all be different and the letter provided to your conveyancer will set out how the mortgage lender intends to work with the conveyancer.
A covering letter which accompanies the mortgage offer to the conveyancer will state the requirements the lender has for the conveyancer to act on behalf of the lender.
These may be things such as:
- The age of the firm
- The number of partners the firm has
- The licensing structure of the firm
- The membership of the firm to any regulatory body etc
The covering letter issued to the conveyancer with the mortgage offer will also state that the requirements are supplemental to those contained in the Council of Mortgage Lenders (CML) handbook(although not all lenders may be members of the CML).
The Council of Mortgage lenders’ handbook contains a set of instructions to conveyancers which has been agreed between the members of the council (mortgage lenders) and conveyancers.
The mortgage lenders’ instructions should also state that they comply with rule 3(19) of the Solicitors Code of Conduct (formerly rule 6(3) of the Solicitors Practice Rules).
Rule 3 states that a conveyancer cannot act for more than one party in a transaction and 3.19 sets out the exceptions to that rule, one of which is that he may act for both purchaser and lender provided that both parties are aware and are in agreement. Should a conflict arise however, the conveyancer must cease to act for either party.
What happens when you get a mortgage offer?
Once you get a mortgage offer, the mortgage lender will continue carrying out more searches on the property and may carry out a more thorough valuation of the property.
Your conveyancer should, however, check that the mortgage offer given by the mortgage lender is accurate and if it isn’t they should inform the mortgage lender of any errors.
Most mortgage offers are now given in a standard format which conveyancers and mortgage brokers should be used to.
The details your conveyancer should check on the mortgage offer include:
The names of the borrowers: this has to be checked to ensure that the mortgage lender has not misspelt the names. It could mean that a credit check has been carried out on someone else and you are being offered a mortgage based on their affordability.
The address of the property: This should be checked for the obvious reasons. If it is a wrong address then the mortgage offer will be invalid and a wrong address could go on to affect things such as the mortgage lenders loan to value on the mortgage if it turns out the property which was valued had a much higher value than the actual property you want to purchase.
The people who are buying the property must be the same people named on the mortgage. There cannot be a person or persons who are parties to the mortgage but not joint owners, or vice versa.
The leasehold details: It is important that the leasehold details on your mortgage are the correct ones as a valuer may have used the wrong details to incorrectly value the property you want to purchase.
The leasehold details to be checked include:
- The remaining lease term
- The annual rent
- the estimated annual service charge
The advance amount: You must check to ensure this is the correct amount and the mortgage lender has taken into account any fees which are paid upfront and those which may be added to the mortgage.
At this stage, the mortgage lender will also expect that your conveyancer will have begun to carry out the legal searches on the property.
The mortgage lender and your conveyancer will exchange questions and answers to ensure everything is right with the home purchase.
The mortgage offer from the mortgage lender will usually also contain a bunch of special conditions which the conveyancer must comply with or ensure are complied with.
Some of the instructions may be directed at the conveyancer and some at the borrower.
Some of the special instructions a mortgage lender may include on the mortgage offer include:
- Ensuring that any existing mortgages are redeemed
- Supplying certified copies of identification documents
- supplying the mortgage lender with survey reports on problems picked up by the valuation which the borrower arranges for.
- Obtaining undertakings to from the borrower for works to be carried out post completion.
There are also a few other considerations your conveyancer will need to take into account after you have received a mortgage offer.
- The mortgage deed
- Certificate of title
- Unsecured borrowing agreements
- Deeds of guarantee
- Occupier consent and waiver form
After all of this is done the main thing you conveyancer will do after you get a mortgage offer is to agree on a completion date with the seller’s conveyancer.
How long does it take after mortgage offer?
Depending on the speed of the mortgage broker you use and especially the mortgage lender you could get a mortgage offer within 1 week of making a full mortgage application.
A mortgage in agreement or mortgage in principle, on the other hand, could take from a few hours to 2 days to get.
Can a mortgage offer be withdrawn?
Yes, a mortgage offer could be withdrawn by the mortgage lender anytime before you complete on the home purchase.
There are several reasons why a mortgage lender could withdraw their mortgage offer, they include:
- The property valuation revealed that the property is overpriced and the real value is much lower than thought at the point you received your mortgage offer.
- The mortgage lender rejects your form or mortgage deposit after a mortgage offer has been given. This could be the case if your mortgage deposit is being gifted and the mortgage lender does not agree to what has been stated in the gifted deposit letter as they feel this could potentially affect the status of their first charge mortgage.
- You could fail further credit searches: A mortgage lender may gain a copy of your credit report and it may reveal things that previously weren’t picked up on when you got a mortgage offer. This could be things such as a bankruptcy, a county court judgement (CCJ), a debt management plan, a default or an Individual voluntary agreement (IVA).
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.