Getting a mortgage offer is a big step towards getting a new home…
Mortgage in Principle
A mortgage in principle is an indication of how much money a lender may let you borrow based on your financial circumstances.
A mortgage in principle can give you an idea of your budget for when you start viewing properties, and it also provides estate agents and sellers with confidence that you are seriously looking to buy and are in the financial position to do so.
These are quicker to get than mortgage offers, and they tend to be valid for 30 to 90 days, though you should check with your lender.
It’s important to remember that a mortgage in principle is not a guarantee that a lender will give you a mortgage offer for the same amount of money, as less information is considered when giving you a mortgage in principle.
Mortgage Offers
You are only given a mortgage offer letter once you have completed all of the mortgage application process. This offer is a confirmation that your mortgage application has been checked and approved by your lender.
Mortgage offers are usually valid for three to six months, but you should always check the exact time-frame with your lender.
If you are happy with the offer, you can then sign to accept, at which point your solicitor or conveyancer can get started on the next steps of exchanging contracts between you and the seller, transferring your deposit, and gathering completion documents like the transfer deed for you to sign.
Once the deposit is paid and contracts are exchanged, a completion day can be agreed (which is usually when you get the keys to your new home). Stamp duty must be paid within 14 days of completion, and you will also need to pay your solicitors fees and any other costs.
A Mortgage Offer is Not the Final Hurdle
With a mountain of processes to go through when buying a house, finally getting a mortgage offer can feel like everything is done and dusted, but this isn’t the case.
You should bear in mind that a mortgage offer is not completely set in stone, as your lender can choose to withdraw your offer if your circumstances change. A change in circumstance could include things like:
- Losing your job
- Becoming unable to work due to health reasons
- The property decreasing in value
- Defects or issues with the property arising
Your financial circumstances can change even after a mortgage offer, especially because buying a property is not a speedy process. You may get promoted or inherit money unexpectedly and decide to look for somewhere more expensive. On the flip side, you may lose your job or break up with your partner, or a whole host of other unexpected things.
At the end of the day, the unexpected can always happen. For example, your property chain may break, affecting your exchange. A property chain is a set of buyers and sellers who are linked together because their purchase or sale of property depends on others. When you buy a property, you are often relying on the person selling it to find somewhere else to move to, often by buying a new home themselves. If for example, there is something wrong with the property your seller wishes to buy, they might break the chain, meaning your sale falls through.
Your mortgage offer can expire before the exchange is complete so it’s a good idea to update your mortgage provider as things go on, as they may decide to extend your offer or make you a new one so your purchase doesn’t fall through.
It’s important that everything within your mortgage offer is accurate. If it isn’t you need to raise it with your solicitor or mortgage broker to get it sorted. A mistake in your contract could lead to the offer being withdrawn.
We have a handy online mini-course which acts as a helpful overview for property purchase and mortgages. Why not check it out?